How Institutions Shape CSR in the MENA

Professor Tanusree Jain, Trinity Business school, Council on Business & Society

Dr-Prof. Tanusree Jain

Doctor Tanusree Jain, Assistant Professor of Ethical Business at Trinity Business School, explores the idiosyncrasies of Middle Eastern and North African institutions and their effect on Corporate Social Responsibility practices.

By CoBS Editor Nicolas Desarnauts from the paper How Institutions Affect CSR Practices in the Middle East and North Africa: A Critical Review, Journal of World Business, Elsevier, by Dima Jamali, Tanusree Jain, Georges Samara and Edwina Zoghbi.

The Middle East and North Africa region — an amalgamation of over a dozen distinctive nations — is more mosaic than monolith. However, the dominance of petroleum-centric capitalism in the region and its consequent contribution to the climate emergency have raised questions about how institutions in these countries shape their sustainable development agendas. In her recent paper, Doctor Tanusree Jain, assistant professor of ethical business at Trinity Business School, uncovers how corporate social responsibility practices are affected by unique institutional environments in this misunderstood part of the world.

Understanding CSR

Understanding CSR at the Council on Business & Society, Trinity Business School, Tanusree Jain

CSR: The bricks & mortar of responsible business

In recent years, research on corporate social responsibility (CSR) practices in non-western countries has proliferated. This has required a new conception of CSR that considers the distinctive institutional context in which CSR as a practice is embedded. In her paper, Dr. Jain defines CSR as “all those activities that firms identify as responsibility towards improving the social state and well-being of their stakeholders including the environment”. This involves building and maintaining relationships with these stakeholders, whether undertaken voluntarily or mandated by local rules, norms, or customs. Indeed, “stakeholder theory” has been the dominant paradigm in the last three decades of global CSR research. According to Dr. Jain, however, in non-western countries, this research has required “coupling stakeholder theory with institutional theory to explain how distinctive institutional pressures influence CSR practices”. An institutional theory approach enables a comparative examination of CSR practices across different national and cultural contexts as stakeholder identities, expectations, and interests vary cross-nationally. As Dr. Jain states: “Institutions specify the rules of the game by defining rights and responsibilities and by prescribing accepted and legitimized social roles, therefore shaping the identities of social actors in ways that are enduring over time”. Therefore, an analysis of institutional environments is critical to understanding the heterogeneity in CSR practices in the Middle East and North Africa (MENA) region.

From patterns to clusters

CSR in the MENA, ethics, diversity, sustainability

Shedding light on a beautifully nested complexity

To analyse how institutions in the MENA region influence the practice of CSR, Dr. Jain conducted a systematic review of over 180 CSR studies of the region. Through this assimilation of existing knowledge, she uncovered different institutional patterns emerging within the region and their impact on CSR. This research focused on 20 countries including Egypt, Sudan, Algeria, Morocco, and Tunisia from North Africa and Yemen, Bahrain, Iran, Kuwait, Saudi Arabia, Qatar, UAE, Oman, Jordan, Lebanon, Turkey, Syria, Libya, Iraq, and Palestine from the Middle East. To capture distinct patterns in the institutional makeup of these countries, Dr. Jain adopted a two-stage process. First, drawing on the Varieties of Institutional Systems (VIS) framework, she identified “country clusters” within MENA based on their institutions. Then, she integrated the VIS framework with a “patchwork institutions lens”. This allowed her to compare and contrast the institutional environments in each country comprising the MENA region. Dr. Jain’s review untangles the country-specific institutional factors affecting CSR, thereby “shedding light on the nested complexity of the institutional make-up of MENA countries and how they shape firm-level CSR practices”. By emphasizing the heterogeneous, dynamic, and continuously changing aspect of institutions, this research provides a better understanding of complex contexts of the MENA region and its influences on CSR.

A thick patchwork

CSR in the Middle East

The patches work

Based on the different institutional environments of MENA countries, the region can be divided into distinct clusters. Dr. Jain identifies five: Fragmented with Fragile State, Family Led, Centralised Kinship, Hierarchically Coordinated, and Conflict-affected. These clusters provide a deeper understanding of the MENA region wherein countries’ “different colonization histories, state forms, traditions, and norms are likely to combine together to form a thick patchwork that will uniquely shape institutional effects on CSR practices”.

  • Egypt and Sudan in North Africa comprise the Fragmented with Fragile State cluster. The role of the state in this cluster is developmental — which impacts CSR practices. The Egyptian government intervenes in and controls some industries by enforcing the Islamic notion of community-centred responsibility through philanthropy. Low levels of general trust in this cluster causes scepticism about CSR practices — especially when these practices are decoupled from religious discourse. However, the elite workforce hired by multinationals values CSR to gain legitimacy locally and competitive advantage internationally.
  • The Family Led cluster is comprised of Algeria, Morocco, and Tunisia. There, state intervention takes both direct and indirect forms. In Morocco, the state primarily promotes CSR policies that improve the competitive strength of local businesses. Although recent political upheavals have weakened its capacity to enforce laws, in Tunisia the state intervenes directly by acquiring ownership in private firms to shape CSR activities. Wealthy families in this cluster exert substantial influence across the economy. The prioritization of their financial interests can have a negative impact as CSR is perceived as a financial cost. Multinationals therefore largely drive the CSR agenda in Morocco in line with international benchmarks and reporting frameworks.
  • Comprised of Oman, Bahrain, Iran, Kuwait, Qatar, Saudi Arabia, and the UAE, the Centralised Kinship cluster is dominated by Middle Eastern countries. The family is at the centre of all social, economic, and political activity in this cluster. The state — where powerful family elites hold political power — intervenes in business affairs directly through ownership and control of firms and indirectly through the legislation of laws and policies. Firms are able to gain legitimacy and societal acceptance in highly-religious societies like Saudi Arabia, Oman, Bahrain, and Qatar, by complying with Islamic prescriptions on CSR.
  • The Hierarchically Coordinated cluster is comprised of Lebanon, Jordan, and Turkey. In Lebanon, the developmental role of the state is diluted due to weaknesses in its law enforcement capacity, thus creating create gaps in firms’ compliance towards CSR, especially for reducing negative externalities. Within Jordan, research reveals direct state intervention in business through public ownership in companies as well as by legislating laws that mandate CSR disclosures. In Turkey, the state has a developmental yet predatory character. While the institutional environment drives firms to adopt western CSR practices to align and compete in European markets, smaller firms embark on philanthropy in a limited way.
  • The Conflict-affected cluster includes Syria, Palestine, Iraq, Yemen, and Libya. These countries are clustered together as they have experienced ongoing political and societal unrest causing massive disruptions to their institutional environments. The state’s capacity to contribute to the welfare of its citizens is limited in this cluster. In Palestine, firms’ contribution to social work is perceived as a national obligation. In Libya, high religiosity among the population makes religion the primary driver for CSR. Moreover, the interconnectedness of wealthy extended families with substantial economic power increase CSR contributions toward the communities in which their businesses are embedded.

Shaping CSR

corporate responsibility, the CoBS

Less complex now you’ve put it all together

The Middle East and North Africa is a complex, fascinating, and diversified region presenting several institutional idiosyncrasies. Countries in the MENA region exhibit different historical experiences of political systems and financial markets, ownership and management traditions, and human capital organization. When juxtaposed with an environment of political, economic and social flux on the one hand, and popularized western standards of best practices on the other, Dr. Jain argues the combination of institutional forces can create unique CSR opportunities and challenges facing businesses functioning in MENA.

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