How to Ensure Corporate Social Responsibility Without Impacting Profitability?
Corporate Social Responsibility (CSR) is defined as a company’s commitment to ethical conduct and contributing to sustainable economic development by working with all stakeholders to improve citizens’ lives. This is done through practices that enhance the quality of the company’s activities without compromising profitability. CSR generates economic, social, and environmental benefits that strengthen a company’s market position and legitimize its operations.
In this article, we at Al-Salama Law Firm & Legal Consultants will explain how to achieve this responsibility without affecting profitability.
Why Is CSR a Mandatory Obligation for Saudi Companies?
In recent years, Saudi companies have captured global attention, not just for the scale of their investments or mega-projects, but also for their rapid embrace of sustainability and social responsibility. The Kingdom’s rise to the 16th global rank in the 2024 CSR index (according to the IMD report) confirms that the Saudi private sector is making confident strides toward international excellence. Furthermore, many international reports are now ranking Saudi companies among the region’s most socially influential.
This means that adopting CSR is no longer just a response to local requirements; it has become a necessity for meeting regional and international expectations. It is now a crucial key to accessing global markets, forging strategic alliances, and building international institutional trust.
Additionally, CSR is a fundamental pillar of the national transformation journey led by Saudi Vision 2030. The vision has not only encouraged this concept but has formally integrated it into its national objectives.
Specifically, Goal 6 of the Vision emphasizes empowering social responsibility. Its sub-objective (6.2) states, “Enabling companies to contribute socially,” followed by indicator (6.2.1), which focuses on “Enhancing corporate social responsibility.” As a result, this commitment has become part of the national strategic framework, rather than merely a voluntary initiative.
Therefore, CSR is no longer a corporate luxury but a legal, developmental, and strategic cornerstone for Saudi investment companies. Committing to it today is an investment in tomorrow, aligning with the national vision and enhancing a company’s local and global standing for several reasons:
- A National Developmental Commitment: CSR is a tool for achieving sustainable development and supporting national priorities in health, education, the environment, and empowering vulnerable groups. It reflects a company’s engagement with national goals and reinforces its status as a partner in building the future.
- Governance and Compliance Requirements: Modern regulations and laws (especially the governance rules of the Capital Market Authority) encourage reporting on social and environmental impact, which promotes transparency and institutional oversight.
- Achieving a Competitive Advantage: Companies committed to CSR enjoy public trust, foster customer loyalty, and have a greater ability to attract talent. CSR also adds an ethical dimension that reflects the company’s commitment to humanitarian values and sustainability, positively impacting its corporate image.
- Government Support and Incentives: Government bodies offer incentives and facilities to companies that actively implement effective community programs.
What Government and Legal Incentives Are Offered to Saudi Companies in the CSR Sector?
The Saudi government provides a variety of incentives to encourage the private sector to adopt and expand corporate social responsibility without affecting profitability. These incentives include:
Exclusion from Zakat Tax Base:
As stated in Article 7, Paragraph 2 of the Zakat Collection System’s Executive Regulations: “Taxpayers (as defined in this Article) who engage in public benefit activities are exempt from Zakat collection. This is through an annual request submitted to the authority within 120 days from the end of the Zakat year, provided that their revenues are allocated for public charitable purposes or the community, and not for specific individuals…”
Increased Company Share Value:
Since 2020, the Capital Market Authority (CMA) has mandated that companies listed on the Saudi stock exchange disclose their CSR policies and initiatives in their annual reports. This drives companies to adopt good practices to maintain their reputation with investors and the public, which positively impacts their share value.
Recognition and Awards:
The Kingdom offers a range of awards to outstanding companies in CSR, which enhances their reputation and brand. These awards include:
- The National Award for Voluntary Work: Supervised by the Ministry of Human Resources, this award recognizes leading companies that support and encourage employee volunteering and implement community initiatives. Winning a national award provides widespread positive media coverage and enhances a company’s status as a preferred employer.
- King Khalid Award: This prestigious award includes a sustainability branch, which honors companies that adopt sustainable and socially responsible practices.
- Mowaamah Certificate: This certificate is granted by the Ministry of Human Resources to companies that create an inclusive and accommodating work environment for people with disabilities. Earning this certificate not only boosts a company’s reputation but may also give it an advantage in government bids and procurements, as priority is often given to companies active in social responsibility.
Corporate Social Responsibility is no longer an option; it is a fundamental strategy for enhancing your competitiveness and increasing your profits.
At Al-Salama Law Firm & Legal Consultants, we help you achieve this through:
- Preparing a legal guidance manual for your CSR projects.
- Developing your company’s governance regulations and integrating CSR initiatives into them.
- Ensuring full compliance with all relevant laws and regulations.
We have extensive experience in the corporate world, and our specialized team works to protect your interests and ensure the sustainability of your business.
Contact us today to begin your journey toward sustainable social responsibility and higher profitability.
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