Corporate responsibility not an after thought

The strong recent performance of the UAE economy has resulted in residential prices in Dubai increasing significantly. This has raised both questions about the sustainability of such increases and memories of the previous real estate bubble, caused in part by the lack of internal and regulatory controls, some malpractices and limited market transparency.

Partly as a response to the problems experienced in the previous cycle, an increasing number of UAE based companies have started to adopt Corporate Social Responsibility (CSR) more actively. For the real estate community, a proper commitment to CSR can lead to reduced business risk, more transparency, and the prevention and resolution of conflicts and malpractices.

CSR is being more widely recognised as one of the elements that distinguish successful, forward-looking companies. The Dubai Chamber of Commerce & Industry has established the Centre for Responsible Business to promote CSR, sustainability and corporate governance good practices. The Chamber also created the Dubai Chamber CSR Label and launched a sustainability network for the companies based in Dubai and the UAE.

The implementation of a CSR policy can give a company greater international credibility, help in building trust and ultimately facilitate the establishment of solid business relations with a wider range of regional and global clients. CSR policies reflect also that the company is willing to consider the impacts of their businesses on the environment and society, generally improving the company’s reputation and enhancing its overall image.

Conflicts

As the implementation of CSR requires companies to be more transparent and communicate clearly their results, it helps avoid miscommunication and limits conflicts between the various real estate stakeholders (investors, developers, agents, government bodies, etc.), leading to a better regulated and more mature real estate market.

Improved transparency and the more regulated regulatory environment can also result in reduced speculative activity, which remains one of the main drivers behind the recent surge in property prices. Stronger CSR policies should also have the indirect benefit of reducing malpractices in the market and the high level of legal and contractual disputes.

Last but not least, CSR policies have a clear impact on environmental issues associated with commercial real estate. Landlords and real estate developers with well-established CSR strategies recognise the importance of reducing their environmental footprint by managing waste, reducing water consumption and saving energy, thus lowering their overall operating costs and ultimately attracting multinational and better quality occupiers.

What does CSR cover? CSR goes beyond just the environmental aspect to also include social and economic elements.

The environmental element deals with issues such as the energy and water footprints of real estate assets. Buildings account for approximately 40 per cent of the global consumption of raw materials and energy and their associated construction and operation is estimated to account for at least 30 per cent of world greenhouse gas emissions.

Operating costs

The most sophisticated developers are increasingly recognising their position at the vanguard of the drive to create more sustainable buildings and sustainable communities. Many occupiers, especially multinationals, are limiting their locational searches to green buildings as they seek to lower operating costs and improve their corporate image.

The social aspect of CSR focuses on the standards by which the company operates with respect to key topics such as employment strategies, health and safety, labour conditions and accommodation.

The economic element of CSR targets improving the communities in which a company operates, in addition to engaging the wider community in sustainable development. This component covers topics such as communities & economic development; tenants and customers.

Recent evidence from developments such as Masdar City, shows that those three elements are interdependent and essential for a complete CSR strategy and many of the larger UAE-based real estate companies are today aware of the importance of having all three dimensions in place.

CSR concerns are likely to gain continued ground in the UAE over the next few years, being reflected in sustainability being chosen as one of the three key themes for the Expo 2020 bid. While currently focused on the UAE, with less interest in CSR issues elsewhere in the region, we would expect this situation to change with greater attention to CSR in other markets across the Middle East over the coming years.

The writer is the CEO at Jones Lang LaSalle, Middle East and North Africa.