CSR in Law and Practice in Saudi Arabia Compared with the UK Model

Corporate Social Responsibility (CSR) in the Kingdom of Saudi Arabia (KSA) is weak both in law and in practice. This thesis proposes solutions to improve CSR regulation and practice in KSA. Doctrinal analysis and a functional comparative law approach are used to analyse both KSA and UK CSR legislation. In the UK, the statutory duty to promote the success of the company (s172) and the strategic report (s414) required by the UK Companies Act 2006 and the non-financial statement are all good starting points, but they are neither joint nor able to sufficiently promote CSR, and s414 does not specify what companies must include in their human rights reports. CSR plans are also lacking in Saudi companies. CSR practices in KSA are unlikely to flourish without significant reform. Zakat as an Islamic practise is sometimes used to implement CSR in Saudi Arabia and the KSA may have been slow to adopt CSR due to the transition from Zakat to CSR. Compared to other countries, the KSA is relatively new to CSR. Most KSA companies adopt CSR practices voluntarily, but compliance frameworks do not always reflect reality. This thesis uses interviews with 30 managers and CSR experts from companies or academic institutions in the UK and KSA to assess how CSR is applied in practice in both countries. It concludes that UK CSR is more regulated and has a stronger legal and strategic focus. UK firms consider both international guidelines and domestic legal frameworks and it has world-leading legislation to protect human rights in supply chains in s54 of the Modern Slavery Act 2015. Enlightened shareholder theory, although it faces challenges in its implementation, is an important step to improving CSR in the UK. By contrast, all economic and social activities in KSA revolve around religion. Saudi businesses follow Islamic agency principles, which means maximising shareholder profits by managers acting as agents for shareholders. Human rights are rarely enforced in the supply chains of most Saudi companies which are typically family-owned, and the focus of many Saudi companies is on improving their local community rather than a broader global outlook. Thus CSR in the KSA may not yet meet international standards. The thesis proposes four solutions for improving CSR in KSA: first, it proposes an Islamic application of Carroll’s pyramid, the I-CSR model. KSA would accept I-CSR because of its religious background. Second, it recommends making donations more strategic. Third, to address the lack of women on Saudi boards, Saudi companies should conduct an annual gender audit. Fourth, it recommends the introduction of a code of conduct that incorporates human rights across supply chains.