The UAE Council of Ministers has issued a new resolution (the CSR Law) concerning Corporate Social Responsibility (CSR) in the UAE which came into force on 1 February 2018. The CSR law imposes reporting requirements on contributions made to CSR activities and financial contributions, which will apply to many companies in the UAE on a mandatory basis, and to others on a voluntary basis. It also offers various incentives to contribute to CSR initiatives. In this briefing, we outline what the CSR Law contains, and the obligations it will place on UAE businesses.
What are the objectives of the CSR Law?
The objectives of the CSR Law are to:
- establish a regulatory framework for CSR contributions in the UAE;
- document, manage and direct CSR contributions made to UAE based CSR initiatives;
- provide incentives and privileges for UAE businesses that contribute to CSR practices within the UAE;
- establish the Federal Social Responsibility Fund, a new body to be created under the authority of the Ministry of Economy (the Fund); and
- empower the Fund to promote a culture of social responsibility, including the preparation of a National Social Responsibility Index as an annual report to rank contributions made by UAE businesses to CSR in the UAE.
The CSR framework will be delivered through a new "smart" platform launched by the UAE Ministry of Economy (the Platform). The Platform will provide information on government strategy and co-ordinate interaction with commercial companies, the State and private-sector entities contributing to welfare and social responsibility within the UAE. UAE businesses will be required to use the platform to report on their CSR contributions.
The Ministry of Economy has already launched a new website that will host the Platform: https://www.csruae.ae/. Applications may be made from now on, by companies contributing to CSR projects and programmes, as well as by beneficiaries and private sector organisations undertaking CSR projects and programmes, for inclusion on the Platform.
Who will have to comply with the CSR Law?
The CSR Law applies to:
- commercial companies of all legal forms operating in the UAE, including banks, financial institutions and branches of foreign companies;
- companies owned (partially or wholly) by Federal or Local Governments; and
- other organisations and entities which opt to be listed on the Platform.
Sole proprietorships, free zone companies and professional service companies are not currently within the mandatory provisions of the CSR Law, but may opt-in to the regime.
What CSR contributions count?
CSR contributions which may be considered for inclusion on the Portal include:
- contributions to social developments by monetary or in-kind contributions to fund development programmes and projects;
- adopting eco-friendly policies for production and work;
- promoting the spirit of innovation and scientific research;
- contributing to solutions to problems or challenges faced by society; and
- establishing a culture of social responsibility though strategies, providing opportunities for humanitarian and community campaigns and initiatives, and engaging in voluntary programs.
The Platform will list the CSR projects and programmes which count for the purposes of positive contributions under the CSR Law. It will include details of the beneficiaries and the stages and progress of those projects and programmes. It is likely that these will be projects which have a direct impact on the development of the UAE, and on the lives of its citizens and residents. However, there are currently no details of projects and programs available.
It does not appear that contributions to CSR projects or programmes beyond those listed on the Platform will be capable of inclusion in a UAE businesses' CSR report.
Is CSR in the UAE to become voluntary or mandatory?
The CSR Law states that social responsibility is based on voluntary principles. However, while CSR contributions will remain voluntary, filing a CSR return and listing on the platform will become mandatory for all businesses in the UAE which fall within the scope of the CSR Law.
Before the annual trade licence renewal, the CSR Law provides that businesses must disclose their contribution, or non-contribution, to social responsibility for the preceding year, via the Platform. If the company discloses a CSR contribution, it must include all data and information relating to the type and volume and the beneficiaries of the contribution. Note that, in practice, co-ordination will be needed between the Federal government responsible for the CSR initiatives (the Ministry of Economy and the Fund) and the Emirate level Economic Departments in order for the requirements to come into effect at the trade licence renewal stage.
Can we use CSR contributions in our marketing and promotions? What are the other advantages of taking part?
The CSR Law envisages that the Fund will issue a Social Responsibility Mark and Social Responsibility Permission as a means to promote selected companies and enterprises. The Fund will allow these companies and enterprises to use the Social Responsibility Mark and Permission for a defined period. Any violations in relation to use of the Mark or Permission will be treated in a similar way to trade mark violations.
Qualifying for the Mark will also bring further benefits and privileges, which are yet to be published. The CSR Law sets out that the Fund will enter into Memoranda of Understanding with stakeholders to form a list of benefits and privileges. Possible benefits may include preference in government tenders, reduced fees and priority in government services.
Is there a cost?
The CSR Law establishes a mandatory annual contribution into the Fund, currently AED 1,500, which forms part of a UAE business's contribution to social responsibility. If companies wish to obtain the Social Responsibility Mark there is a required contribution of AED 10,000, and AED 15,000 to obtain the Social Responsibility Permission.
What can we do now?
It is clear that the new UAE CSR regime will have an impact and cost implication for most businesses operating in the UAE.
To take advantage of some of the benefits that the CSR Law will provide to companies which want to make a social responsibility contribution, now is a good time to:
- assign responsibility internally for CSR activities, and for the annual CSR report;
- monitor the Platform for listings of new projects and programmes to get involved with;
- speak to the management of any projects or programmes which businesses currently contribute to, with a view to recommending an application to the Fund for inclusion on the Platform; and
- maintain logs of the details of CSR activities undertaken by the business to ensure timely disclosures on the Platform for their trade licence renewal.
The CSR Law sets out some clear requirements and expectations that private companies will need to start to disclose their CSR activities and contributions. While it may take time for these requirements to come into force, due to the required co-ordination between the relevant Federal and Emirate level government entities, on-shore companies in the UAE should start reviewing their CSR activities with a view to making the appropriate disclosures for their trade licence renewal.