CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABILITY POLICIES AND PRACTICES2013 MIDDLE EAST AND TURKEY SURVEY REPORT

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CONTENTSINTRODUCTION 3

ABOUT THE SURVEY 4

KEY FINDINGS 6

SURVEY RESULTS 7

• Policy 7

• Strategy 8

• Reasons for Implementation 9

• Reporting and Budgeting 9

• Strategy and Policy Structure 10

• Organisational Structure 11

• Level of CSR/Sustainability Leader and Reporting Relationship 12

• Activities 13

• Employee Engagement 14

• Employee Health and Wellness 16

• Metrics, Recognition, and Inquiries 19

• Challenges 20

• Future Plans 22

CONCLUSION 23

In an environment where needs are growing and resources are being depleted, companies are starting to redefine their corporate social responsibility (CSR) and sustainability programs and look at these topics more strategically. The situation presents an opportunity for business innovation that contributes to society and drives competitive advantage.

For many companies, CSR/sustainability is a component of the overall business strategy, and companies implement and prioritise social and environmental projects that are connected with their core business. This enables companies to use not only monetary resources to support such programs, but to leverage their internal expertise and capabilities to generate longer-term benefits for society. Many businesses have transformed their products and services by taking into account social and environmental factors while still supporting — and in some cases advancing — business objectives.

A move from traditional economic growth to sustainable economic growth that considers social and environmental matters alongside financial factors is becoming more prevalent in business today. As the concepts of CSR/sustainability become further embedded in corporate strategy, companies will move forward to create ever more significant value for both business and society.

The Corporate Social Responsibility and Sustainability Survey in the Middle East and Turkey was conducted to offer a unique perspective on and a starting point for discussion around the CSR/sustainability landscape in the Middle East and Turkey, and to identify its influence on several business factors. The results of the study represent different industries and organisation sizes and we hope that they will assist companies in benchmarking their programs and further developing their CSR/sustainability strategies.

INTRODUCTION

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The Corporate Social Responsibility and Sustainability Survey in the Middle East and Turkey represents Mercer’s first research into these topics as they relate to companies in this region. The survey was conducted online in April 2013 across the Gulf Cooperation Council countries and Turkey.

The survey aimed to identify:

• The main drivers for CSR/sustainability engagement by companies in the region.

• Key current and future CSR/sustainability initiatives and challenges.

• Activities that comprise CSR/sustainability efforts, and how they are handled, communicated, and quantified.

• The structure of the CSR/sustainability function and its role in organisations.

• The influence of CSR/sustainability initiatives on employee engagement and health.

For the purposes of the survey, CSR and sustainability were treated together.

A global version of the CSR/sustainability survey was conducted in 2012, with 82 multinational companies participating worldwide. Where relevant, we have cited results from the global survey in this report.

In the survey results data tables, “N” refers to the number of respondents that answered each question. Because every question was not answered by every company, “N” varies from question to question.

As with any survey, the results reflect the views of the respondents and may not be statistically robust in all areas, so decisions taken on the strength of the data reported should reflect an appropriate degree of caution.

ABOUT THE SURVEY

READING THE REPORT

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A total of 41 companies participated in the survey. The majority of participants were located in the United Arab Emirates (32%), Saudi Arabia (30%), and Turkey (25%). The remainder of respondents were from countries including Egypt (5%), Lebanon (2%), Kuwait (2%), and Qatar (2%), and one respondent was based in the UK with an EMEA-wide role in CSR/sustainability.

A relatively equal distribution among the types of participating organisations was evident with large local companies (32%), multinationals headquartered in the Middle East and Turkey (34%), and local operations of multinationals headquartered outside the region (34%) each representing approximately one third of responding companies.

Respondents included employers of all sizes:

• One-third have a workforce of 5,000 or more employees (including a quarter of companies employing 10,000 or more individuals), 32% employ 1,000 to 4,999 employees, and 35% have less than 1,000 employees.

• The majority of participating companies have an annual revenue of US$100 million or more (73%) and just over a quarter have an annual revenue of less than US$100 million (27%).

• The main business sectors of the respondents are engineering, construction and natural resources (29%), manufacturing (27%), business services (22%), health care (5%), holdings (5%), and other industries (12%).

SURVEY DEMOGRAPHICS

Distribution of Survey Respondents Across Revenue Size Categories

N=40

Less than US$10 million

US$10 million to US$100 million

US$100 million to US$1 billion

Over US$1 billion

15%

12%

33%

40%

Distribution of Survey Respondents Across Employer Size Catagories

N=41

Less than 100 employees

100 to 499 employees

500 to 999 employees

1,000 to 4,999 employees

5,000 to 10,000 employees

More than 10,000 employees

5%

22%25%

8% 8%

32%

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• Just over half of the participants (54%) have a formal CSR/sustainability policy; 24% have an informal policy or guidelines; and 17% undertake activities on an ad hoc basis, with no policy or guidelines.

• Among companies with a formal or informal policy, 58% have employed the policy for a period of four years or less, while 42% have had the policy for five years or more.

• The majority of participants (83%) indicated that CSR/sustainability has become more important over the past two years. While 86% of participants stated that it is a very important or important component of their business strategy, a similar percentage (83%) indicated that CSR/sustainability is a part of their strategic objectives.

• Approximately two-thirds of participating companies stated that CSR/sustainability is part of their founding mission statement (62%), while 41% of programs were self-developed most often to help with corporate culture definition, reputation management, and overall company performance. Forty-two percent implemented programs as a result of external influences, most often from employees and customers.

• Around half of participants (49%) stated that they issue an integrated, annual report on their CSR/sustainability activities.

• While strategy and policy development for CSR/sustainability varies between global and local levels, policy enforcement most often occurs at the local level (75%). Regional strategies are the least common.

• Only about a quarter of companies have a core team dedicated to CSR/sustainability, with the majority reporting that other departments/functions have part-time responsibility for CSR/sustainability (47%). The most common function both regionally and globally with part-time responsibility is human resources.

• The level of the leader responsible for CSR/sustainability is most commonly senior management level.

• CSR/sustainability is reported to the CEO by 41% of respondents.

• Employee health and wellness was identified as the top area for CSR/sustainability activities (82% of respondents). And over half of respondents (57%) indicated that employee health and wellness programs are a very important component of their CSR/sustainability program.

• Over half of respondents indicated that CSR/sustainability activities have resulted in a significant or considerable improvement in employer brand recognition (64%), employee loyalty (55%), and employee retention (52%).

• Stress relief training/counselling and smoking cessation programs were reported to be the top two employee benefits that should be included in a CSR/sustainability program.

• Only 32% of companies use metrics or standards to monitor their CSR/sustainability activities.

• Quantifying the business value of sustainability and measuring CSR activities ranked equally as the top current challenges faced by companies in the region.

• Most companies (85%) plan to increase their CSR/sustainability efforts within the next two years.

KEY FINDINGS

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SURVEY RESULTS

POLICYMercer’s global survey on CSR/sustainability, conducted in late 2012, showed that 81% of companies have a CSR/sustainability policy. The Middle East and Turkey survey findings were in line with global results, showing that 78% of companies in the region have such a policy in place.

Of companies that stated that they are undertaking CSR/sustainability activities without a policy or guidelines (17%), close to half of them (43%) plan to develop a formal policy within the next two years. Only 5% of respondents indicated that their company does not undertake CSR/sustainability activities.

Among companies with a CSR/sustainability policy in place, almost all stated that their policy is readily available internally (91%) on the company intranet site and/or in the HR manual and procedures, whereas only half list their policy externally, typically on their company website.

Looking at policy maturity, 41% of employers have had a CSR/sustainability policy for a period of four years or less, while a similar percentage (42%) have had a policy for five years or more. Among companies with policies in place for five years or more, one-quarter has had a policy in place for 10 years or more. This demographic predominately comprises multinational companies headquartered in the region with more than US$1 billion in revenue and over 10,000 employees.

Percentage of Participating Companies With a CSR/Sustainability Policy

N=41

Yes, a formal policy

Yes, an informal policy

Yes, but with no policy or guidelines

No, our company does not partake in any such activities

5%

54%

24%

17%

8

3%

N=35N=35

Importance of CSR/Sustainability as a Component of the Business Strategy

Change in Importance of CSR/Sustainability Over the Past Two Years

A large majority of respondents indicated the increasing importance of CSR/sustainability in their companies and throughout the region.

• CSR/sustainability has become more important over the past two years for 83% of participants.

• CSR/sustainability is a very important or important component of the business strategy for 86%. None of the respondents indicated that it was unimportant or not important at all.

• CSR/sustainability is part of the company’s core mission statement for 86%.

• CSR/sustainability is part of the company’s strategic objectives for 83%.

Comments from participants regarding their company’s strategic objectives include:

• “Discussed (CSR) and approved at the family (management) council level.”

• “A five-year strategy is built for CSR activities and sustainable projects with clear feedback to internal and external shareholders on the main business strategy.”

• “Represented in our Corporate Strategic Objectives No. 14: to reduce water and electricity consumption; and No. 23: to further improve the living conditions of our workforce.”

• “We aim to be leaders in this space, both as a company and through our clients.”

STRATEGY

43%

14%

Extremely important

Important

Neither important nor unimportant

Has become more important

Has remained the same

Has become less important

83%

14%

43%

Unimportant — 0%

Not at all important — 0%

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3%

When asked the reasons for implementing a CSR/sustainability policy, approximately two-thirds of participating companies stated that it is part of their founding mission statement (62%). Companies also indicated that the policy was self-developed (41%) for reasons that include defining company culture, managing the company’s reputation, and improving overall company performance. External factors for companies (32%) also came into play with employees, customers, and senior management as top influencers for CSR/sustainability policy implementation.

Companies who have developed an integrated annual report on their CSR/sustainability activities and those who did not were almost equally distributed, with 49% issuing a report and 51% not doing so.

Fifteen respondents stated that their organisation had a centralised budget for CSR/sustainability programs. Across industries (excluding oil and gas) and company sizes, budgets were variable, ranging from US$10,000 to US$4 million. The highest centralised budgets listed in the survey were in the oil and gas industry and averaged US$250 million. However, it is important to note that oil and gas centralised budgets are relatively higher because they are generally allocated as a percentage of company revenue and must cover multiple countries.

For the remaining companies without a centralised budget, other funding options included a decentralised budget (47%), grants and government incentives (24%), project-based monetary support (18%), and other options (11%).

REASONS FOR IMPLEMENTATION

REPORTING AND BUDGETINGNumber of Years Company Has Issued an Annual CSR/Sustainability Report

Has your company downsized any CSR/sustainability functions or activities over the past two years?

N=35N=35

Does not issue public reports

Less than a year

1 to 2 years

3 to 4 years

5 to 9 years

10 years or more

51%

14%

12%

14%

6%

Yes 6%

No 89%

Unsure 6%

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Local (60%) and global (43%) CSR/sustainability strategy structures were the most predominant among participants. Regional strategies were less common with just 31% of companies following this type of structure. Policy development occurring at global (59%) and local (56%) levels were relatively equal in responses; however, policy enforcement was most often left to the local offices (75%).

STRATEGY AND POLICY STRUCTURE

How Is Your CSR/Sustainability Strategy Structured? (More than one answer could be selected.)

At What Level Do The Following Activities Occur? (More than one answer could be selected.)

Global Regional Local

59% 28% 56%

47% 28% 75%

Policy development

Policy enforcement

Global strategy

Local strategies

Regional strategies

43%

60%

31%

N=35

N=32

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ORGANISATIONAL STRUCTUREIn both the global and regional surveys, close to one-quarter of participating companies stated that they have a dedicated team responsible for CSR/sustainability, while more companies — both globally and regionally (59% and 47%, respectively) — have cross-functional teams with part-time responsibility. Among the remaining respondents, other types of structures were indicated, including a supervisory board and a committee for CSR/sustainability.

The results clearly indicated that the top three departments with part-time responsibility for CSR/sustainability in the region are human resources (48%), corporate communications (45%), and public relations (33%). Human resources and corporate communications were also the most common responses in the global survey.

Departments With Responsibility for CSR/Sustainability Implementation (More than one answer could be selected.)

Global Regional

69%

26%

27%

20%

48%

33%

27%

21%

53%

50%

27%

24%

45%

27%

24%

12%

Human resources

Public relations/public affairs

Business development

Quality control

Corporate communications

Environmental, health, and safety

Stand-alone CSR

Other

N=74 N=33

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LEVEL OF CSR/SUSTAINABILITY LEADER AND REPORTING RELATIONSHIPEven within the majority of companies that assign part-time CSR/sustainability responsibility to other functions, the leader of the CSR activities is predominantly at senior management level — 77% of respondents identified the CSR leader as a director, vice president, board member, or executive. The importance of CSR/sustainability is reinforced, as these leaders have a direct relationship to the C-suite and executive committee.

Level of CSR/Sustainability Leader

CSR/Sustainability Reporting Relationship (More than one answer could be selected.)

41% of respondents

indicated that the CSR/sustainability

leader reported directly to the CEO.

20%

20%

17%

11%6%

N=34

Chief executive officer

Executive committee

Senior management

Chief operating officer

Corporate responsibility officer

Other

Chief marketing or communications officer

President

Chief administrative officer

Chief financial officer

Chief human resources officer

41%

32%

24%

15%

15%

12%

6%

6%

3%

3%

3%

N=35

Executive

Board member

Director

Manager

Vice president

Other

26%

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ACTIVITIESThe three core areas for CSR/sustainability activities identified by respondents were employee health and wellness (82%), community-based development (74%), and environmental affairs (68%).

The high importance given to employees’ health and wellness by participating employers in the Middle East and Turkey concurs with the findings from Mercer’s recent EMEA Health Care Survey. Conducted in late 2012, that survey reported that the majority of respondents (79%) were addressing workforce health as part of their corporate social responsibility to their community.

Furthermore, the top three core areas all require long-term investment of both time and resources, which shows that CSR/sustainability programs are moving towards longer-term, sustainable projects rather than being treated as one-time initiatives.

Approximately one-fifth of respondents indicated that fundraising (21%) is an integral part of CSR/sustainability, placing it last on the list of core areas. By its very nature, fundraising is typically a one-time initiative, so this result further highlights the move towards longer-term projects. While fundraising is an effective method for companies to support an environmental or social cause, the results showed that companies may start to look at fundraising on a longer-term basis (for instance, donating a certain percentage of sales per year) or as a part of a larger social responsibility campaign.

Core Areas Considered for CSR/Sustainability Activities (More than one answer could be selected.)

Employee health and wellness

Community-based development

Environmental affairs

Employee safety

Labour/employee relations

Community work

Compliance

Employee volunteering

Product safety and stewardship

Sustainability cost effectiveness

Supply chain

Economic progress

Fundraising

N=34

82%

74%

68%

65%

65%

59%

50%

50%

41%

38%

35%

32%

21%

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EMPLOYEE ENGAGEMENTWhen asked to what extent CSR/sustainability positively influenced employee engagement factors, survey participants indicated that employer brand recognition (64%), employee loyalty (55%), and employee retention (52%) were improved to a significant or considerable extent.

In addition, when considering CSR/sustainability’s impact on other business factors, similar proportions of respondents reported a significant or considerable influence on brand recognition (68%), customer confidence (56%), and quality improvement (53%).

Employee Engagement Factors Significantly or Considerably Improved by CSR/Sustainability

39% 24%

33% 21%

24% 27%

28% 22%

30% 18%

28% 16%

33% 9%

N=33

To a significant extent

To a considerable extent

Employer brand recognition

Employee loyalty

Employee retention

Employee productivity

Job satisfaction and fulfilment

Employee morale

Talent attraction

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A significant percentage of participants (59%) indicated that they conduct employee engagement surveys; among them, 65% reported that specific workforce engagement factors are measured to identify the impact of CSR/sustainability on employees.

The factors most commonly used by these companies to identify the impact of CSR/sustainability on employee engagement are employee pride in the company (92%), employee morale (83%), and job satisfaction and fulfilment (75%). Other metrics used in surveys include employee loyalty and productivity (both 67%) and recommendation to others as an employer of choice (58%).

Business Factors Significantly or Considerably Improved by CSR/Sustainability

45% 23%

25% 31%

38% 16%

26% 26%

26% 23%

22% 25%

19% 19%

26% 10%

N=32

Brand recognition

Customer confidence

Quality improvement

Risk management

Investor relations

Business development

Financial results

Cost efficency

To a significant extent

To a considerable extent

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The connection between CSR/sustainability and a company’s internal stakeholders is becoming more evident. Over half of the respondents (57%) indicated that employee health and wellness programs are a very important component of their CSR/sustainability program.

When asked which employee health and wellness benefits (excluding medical-related insurance benefits) companies believed are the most important to include in a CSR/sustainability policy, the majority elected stress-relief training and counselling (84%) and smoking cessation programs (62%) as a priority. However, a clear gap exists between the idea and the application, as only 31% and 19% of respondents, respectively, indicated that their company currently offers these two benefits to employees.

EMPLOYEE HEALTH AND WELLNESS

Importance of Employee Health and Wellness Programs as Part of Company’s CSR/Sustainability Policy

3%

N=35

Very important

Important

Somewhat important

Not important

Not applicable

57%

14%

17%

9%

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Comparison Between Benefits Offered and Benefits Considered Important as Part of CSR Policy (Employee Health and Wellness Benefits, Excluding Medical-related Benefits)

N=32

Stress relief education/ training/counselling

Smoking cessation program

Gym/sports/fitness/ health club memberships

Onsite healthy food choices (in cafeteria and vending machines)

Individual medical screening (beyond legal requirements)

Dietary advice

Personal health risk assessments

Online health information/education

Personal health coaching

Onsite or near-site clinics

Onsite gym facilities and showers

Other

Onsite physiotherapy

84%

63%

19%

56%

31%

53%

34%

47%

28%

38%

25%

34%

22%

31%

34%

25%

22%

25%

22%

25%

19%

9%

13%

6%

13%

31%

Benefit consideredimportant to have as partof CSR policy

Benefit offered

Other fluctuations between “benefits offered” and “benefits considered important to have as part of a CSR/sustainability policy” can also be seen:

• Personal health coaching and onsite/near-site clinics are both considered important benefits by one-quarter of respondents and a similar percentage (22%) indicated they are being offered to employees.

• While only 6% of respondents stated that onsite physiotherapy is an important benefit for CSR/sustainability policy, more than double the respondents (13%) offered the benefit.

These variations in implementing employee benefits demonstrate that companies need to first assess and understand their workforce’s health risks to be able to design a health and wellness program most suited to their employee population. In doing so, employers will be able to accurately evaluate the value added and optimise the return on investment from their wellness programs.

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METRICS, RECOGNITION, AND INQUIRIESAs companies continue to budget funds, increase activities, and excel in CSR/sustainability, the requirement for metrics, indices, and research grows.

There are several different metrics and standards available to assist in monitoring a company’s CSR/sustainability efforts. While the majority of respondents in the region (68%) reported that their company does not use any metrics for CSR/sustainability, among the companies that do (32%), the Global Reporting Initiative and Carbon Disclosure Project were the most frequent standards and metrics listed.

Recognition of a company’s CSR/sustainability efforts can occur in multiple ways: notably, 71% were featured in media reports, 55% were invited to speak at conferences, and 42% received awards. Some of the awards listed by respondents were:

• Green FM Company of the Year 2012.

• CSR Excellence Award, Arab Organisation for Social Responsibility.

• Energy Efficient Facility Award, Ministry of Energy (Turkey).

Inquiries for information on the company’s environmental and/or social performance occurred in 46% of regional participants, whereas globally a higher percentage of companies received inquiries (68%). The regional inquiries are typically received from government organisations (67%) and media (40%). One-third of companies also receive such inquiries from academics and investors. While about a quarter do not track the frequency of investor-related inquiries, among those that do, 20% receive up to four inquiries annually and 14% more than 20.

WHAT IS THE GLOBAL REPORTING INITIATIVE (GRI)?

• It is a not-for-profit organisation that promotes economic, environmental, and social sustainability.

• It provides a comprehensive sustainability reporting framework used around the world.

• The GRI Sustainability Reporting Framework enables the measurement and reporting of sustainability performance and allows for reporting transparency and accountability.

For more information: www.globalreporting.org

WHAT IS THE CARBON DISCLOSURE PROJECT (CDP)?

• It is an independent, not-for-profit organisation working to drive greenhouse gas emission reduction and sustainable water use by businesses and cities.

• It provides a transformative global system for thousands of companies and cities to measure, disclose, manage, and share environmental information.

• It uses measurement and information disclosure to improve management of environmental risk.

For more information: www.cdproject.net

CHALLENGESCSR/sustainability, as with any other business activity, does not come without challenges. The top-ranking current challenges for regional participants were the ability to quantify the business value of sustainability activities — the same response as for the global survey participants — and measuring CSR activities, followed by benchmarking data to peer companies.

Both globally and regionally, budget and resources limitations were also ranked similarly. However, one striking difference was the idea of employers considering employee engagement and involvement in CSR activities as a challenge — globally, 40% of participants listed it as a challenge, whereas in the Middle East and Turkey, only 22% of respondents indicated the same.

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21

40%

19%

32%

22%

22%

13%

40%

8%

25%

7%

22%

16%

13%

9%

Business integration of CSR/sustainability function

Maintaining CSR efforts in the long term

Executive engagement and/or buy-in

Employee involvement and engagement in CSR activities

Other

Supply chain transparency

Managing external group pressure

CSR/Sustainability Challenges Companies Are Currently Facing (More than one answer could be selected.)

GlobalChallenge Regional

53%

30%

37%

29%

47%

44%

31%

25%

44%

45%

23%

26%

47%

34%

28%

25%

Quantifying business value of sustainability activities

Benchmarking data to peer companies

Resource limitations

CSR/sustainability strategy implementation

CSR measurement

Budget limitations

Tracking and monitoring carbon footprint

CSR/sustainability structure

N=73 N=32

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FUTURE PLANSPerhaps to overcome some of these challenges, 85% of participants plan to increase their CSR/sustainability efforts over the next two years. Among those companies, just over half (53%) plan to increase resources and a similar percentage (50%) plan to report publicly on their activities.

Furthermore, the majority (74%) of respondents indicated that their company needs to do more on CSR/sustainability, while seperately, 78% stated that this needs to happen within their own companies.

CSR/Sustainability Areas in Which Companies Believe They Could Do More (More than one answer could be selected.)

Areas in Which Companies Plan to Increase CSR/Sustainability Efforts Over the Next Two Years (More than one answer could be selected.)

Increase resources

Report publicly on activities

Conduct more supplier training on social and/or environmental standards

Improve ecological aspects of our product line

Make CSR/sustainability a board responsibility

No increase in CSR planned

Hire external expertise to advise us on CSR/sustainability program

Other

53%

50%

26%

21%

15%

15%

12%

9%

N=34

N=23

CSR/sustainability within our own company

Communication of CSR/sustainability activities to the public

Social conditions in the supply chain

Environmental conditions in the supply chain

Ecological aspects of our product line

Other 4%

22%

39%

48%

70%

78%

CONCLUSIONWe see that both globally and regionally, CSR/sustainability is becoming an increasingly important business issue. It is being identified as an integral part of business strategy and is gaining traction as a top priority on the agenda of business leaders today.

The results of our survey indicate that employers recognise the significance of CSR/sustainability’s role not only in addressing social and environmental issues, but also in positively influencing a large range of business factors, from strengthening the employer-employee relationship to increasing customer loyalty and overall company performance.

However there are challenges to overcome. Classification and quantification of data for CSR/sustainability projects is an issue for many employers, particularly around the ability to accurately measure the return on investment of these projects. The lack of strong data on the value added by CSR/sustainability naturally imposes limitations on budget and resources. Therefore, it is encouraging that companies understand that there is room for improvement and are looking at ways to become more effective in the future.

As employers continue to develop their CSR/sustainability strategies, these organisations will become the accelerators of deep-rooted social change, not only within their companies but in their larger communities. As responsible business becomes the new global norm, an authentic CSR/sustainability strategy will be key for companies to stay competitive in the market.

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Copyright 2013 Mercer LLC. All rights reserved. 12246-MG

For further information, please contact your local Mercer office or visit:www.me.mercer.com (Middle East)www.mercer.com.tr (Turkey)

For any inquiries, please contact Cindy Arkin at cindy.arkin@mercer.com.