Comparing the Corporate Social Responsibility (CSR) Between Saudia Ground Series Company (SGS) in Saudi Arabia and Danata Company in United Arab Emirates
Ground handling service companies are under similar pressure to airlines and airports to operate in an ethical, socially-responsible, and sustainable manner. The demand is likely to increase in the future if the aviation traffic grows in the anticipated rate of 8.5 % per annum. Dubai National Air Travel Agency (Dnata) of the United Arab Emirates and Saudi Ground Services Company (SGS) of Saudi Arabia are strategically located in the Middle East, where massive industry growth is projected. This study aims at comparing the CSR activities of the two companies as their source of competitive advantage. The study intends to determine the CSR activities of Dnata that can be adopted by SGS. Therefore, qualitative research using secondary data obtained from online sources will be used. The data will be analyzed through textual and thematic analysis to reveal the CSR initiatives and the motivations of both companies. Recommendation of the CSR strategy that SGS should adopt from Dnata will be provided to help SGS improve its competitive advantage in the Gulf region.
Comparing the Corporate Social Responsibility (CSR) Between Saudia Ground Services Company (SGS) in Saudi Arabia and Danata Company in United Arab Emirates
Background of the Study
Ground handling service firms operate in the highly competitive aviation industry. Although they are less visible than airlines, they provide vital services to the aircrafts and passengers. Data from Statista indicated that the air travel passenger traffic grew by 7.4 percent in 2018 and was projected to grow by another 5 percent in 2019, globally (Mazareanu, 2019).
The performance of airports in the Gulf region has outpaced that of traditional hubs in Europe in recent years. The convenient location of the Gulf has attracted many air travelers considering that two-thirds of the global population is only about 8-hours away from the Middle East airports (Steer Davies Gleave, 2016). Moreover, airports in the region have invested heavily in modernization and expansion programs, while airlines have increased their fleets to handle the rising number of passengers and cargo. The United Arab Emirates and Saudi Arabia account for 50 % and 21 % of the aircraft fleets in the GCC region, respectively. They also have the most airports in the region, with Saudi Arabia boasting of 33 airports against UAE’s nine (Al Masah Capital Limited, 2015).
Statement of the problem
Corporate social performance has interested social scientists since the 1950s. Since this time, this concept’s focus has changed from businesses giving back to society to reducing the negative impact of business activities and resolving social problems using business resources (Wood, 2016). The ground handling services sector is a segment in the aviation industry, which has a significant environmental footprint. In addition, this sector closely deals with people such that the quality of its services influences customer and public relations significantly. To sustain its social license to operate, the ground handling service providers need to engage in activities that illustrate their social responsibility.
Many companies focus on profits at the expense of corporate social responsibility activities, considering the slim profit margins in the aviation industry. Moreover, companies focused on growing their businesses may invest more in expansion programs and ignore the communities and environment around them (Steer Davies Gleave, 2016). Dubai National Air Travel Agency (Dnata) of the United Arab Emirates and Saudi Ground Services Company (SGS) in Saudi Arabia are ground handling service companies in the Cooperation Council for the Arab States of the Gulf (GCC) region. However, Dnata is much larger than SGS, considering it has an international presence while SGS operates exclusively in Saudi Arabia (Aljazira Capital, 2018; Steer Davies Gleave, 2016). Besides, Dnata handles larger volumes of airport activities compared to SGS, which makes it influential to a more significant number of customers (Aljazira Capital, 2018; The Emirates Group, 2019). Therefore, although both companies engage in corporate social responsibility activities, it is likely that their initiatives may differ given the different sizes of the companies. Moreover, SGS could wish to emulate Dnata in its global expansion and therefore, may use CSR as a way of gaining a competitive advantage in the ground handling services industry. However, previous studies have not compared the CSR activities of these companies or investigated how well they have used their CSR initiatives to gain competitive advantage and grow their businesses. This study seeks to address this gap in information.
Research aim, objectives and question
this study aims to identify the good corporate social responsibility initiatives in Dubai National Air Travel Agency (Dnata) in the United Arab Emirates that can be adopted by Saudi Ground Services Company (SGS) in Saudi Arabia. This will be done by comparing the corporate social responsibility activities in both companies and selecting the good ones that Dnata practices that can be incorporated by SGS.
The objectives of this study are:
- To identify the corporate social responsibility initiatives of Dnata.
- To determine the corporate social responsibility initiatives of SGS.
- To compare the corporate social responsibility initiatives of Dnata and SGS.
- To determine the good corporate social responsibility initiatives at Dnata not present at SGS.
- To recommend the good corporate social responsibility initiatives at Dnata that can be adopted by SGS.
In this regard, this study will seek to answer the question, ‘which are the good corporate social responsibility initiatives at Dnata that can be adopted by SGS?’
Purpose and significance of the study
The purpose of the study to identify the CSR initiatives undertaken by Dnata that are absent in SGS. This will require that the CSR activities of both companies are identified and compared. The significance of the study is to improve the CSR practices of SGS to strengthen its competitiveness against Dnata. The recommendations made to SGS would enhacne its attractiveness as a ground handling service provider in the Gulf region and prepare it for diversification and international expansion.
Different reasons motivate organizations to engage in corporate social responsibility activities. Some companies engage in CSR initiatives to gain public acceptance, while others do so for financial gain or increasing employee engagement. The theories supporting the reasons for CSR practices in different organizational contexts can be explained through institutional theory, legitimacy theory, and stakeholder theory. Fernando and Lawrence (2014) argued that since these three mainstream theories were complementary rather than in competition, they provided an integrated theoretical framework for predicting and explaining the motivations of CSR practices. Also, they have been used extensively in the CSR literature to explain and support CSR actions in firms.
The institutional theory proclaims that organizations conformed to industry norms and adopted homogenous characteristics due to institutional pressure. This provided them with the legitimacy and guaranteed accruing rewards. The legitimacy theory asserts that organizations endeavor to conform to the norms of the society in which they operate as a social contract (Fernando & Lawrence, 2014). However, since the rules and expectations of society continuously change, companies experience legitimacy gaps and legitimization threats when they act in a contrary manner. The stakeholder theory posits that organizations work to meet the interests and expectations of their multiple stakeholders (Shahzad, Rutherford & Sharfman, 2016). Therefore, the accountability of firms goes beyond financial performance and should include social and environmental performance, among others. Moreover, all stakeholders have the same right for equal and fair treatment by their firms. However, managers tended to meet the expectations of the most resourceful stakeholders while ignoring the insignificant ones (Fernando & Lawrence, 2014). Therefore, companies engaged in CSR activities similar to those of their peers to conform to the industry norms, to gain, maintain, and renew the legitimacy of their operations, and to appear accountable and responsible to their stakeholders, according to the institutional theory, legitimacy theory and stakeholder theory respectively. According to Fernando and Lawrence (2014), these theories converge when they explain CSR from the system-oriented and political economy perspectives
Literature review based on the theoretical framework
Corporate Social Responsibility
Corporate social responsibility is a complex and complicated concept whose definition lacks universal coherence. Yang and Guo (2014) observed that the CSR concept was associated with several labels such as business and globalization, business and governance, business and society, corporate environmental management, corporate citizenship, and business ethics. As such, various diverse definitions have emerged in the literature. For instance, Rim and Song define CSR as the ‘company’s voluntary commitment to contribute to the betterment of society’ (2017, p. 383), while Sheehy (2015) defines it as ‘international private business self-regulation’ (p. 625). Mosca and Civera define it as ‘the sum of practices, policies, and strategies linked with social and environmental benefits that corporations implement to serve multiple stakeholders’ interests simultaneously’ (2017, p. 16). Nonetheless, CSR is seen as an aspect of corporate social performance that has ethical, economic, legal and philanthropic dimensions, which is a perspective that is widely adopted in academia (Hamidu, Haron & Amran, 2015; Yang & Guo, 2014). Moreover, Alhaddi (2015) revealed that sustainability constructs, such as the triple bottom line (TBL), were increasingly being used to guide CSR worldviews. As such, the corporate social performance of enterprises could be measured along economic, environmental, and social dimensions.
The CSR concept has evolved since its emergence in the 1920s, as explained by Hack, Kenyon and Wood (2014), Hamidu, Haron and Amran (2015), Mosca and Civera (2017), Wood (2016) and Yang and Guo (2014). In the 1960s, the CSR perspective was ethically-oriented, with the focus being on doing ‘good’ for the society (Hack, Kenyon & Wood, 2014). Movements related to the rights of women and citizens, and environmental protection influenced the understanding of the CSR concept at the time; that of enhancing corporate social performance (Wood, 2016; Yang & Guo, 2014). However, differentiation and prosperity perspectives of CSR emerged in the 1970s, in which volunteerism, good neighborliness and stakeholder concerns were included in CSR. In the 1980s, the stakeholder management model for advancing the social responsibility of businesses emerged and the stakeholder theory was used to motivate CSR actions (Mosca & Civera, 2017). This shifted the ethical orientation of CSR to a business focus. In the 1900s and 2000s, CSR was seen as a strategic and managerial tool for businesses, while the new millennium came with the concepts of citizenship and sustainability. Hamidu, Haron and Amran (2015) denoted this conceptual development as instrumental or strategic CSR.
Multiculturalism and globalization have presented new views as well as challenges to the conceptualization of CSR. For example, Yang and Guo (2014) argued that the western concept of CSR conflicted with the Chinese one, bringing in the cultural differences to the complexity of defining CSR. The Chinese emphasize the legal dimensions of CSR, while the West focuses on sustainability. Likewise, Hamidu, Haron and Amran (2015) highlighted the importance of the religious influence of corporate behavior. They revealed that the concept of ‘maslaha’, meaning the public good, was emphasized by the Islamic faith and anchored in the Shariah. In addition, Rasche et al. (2017) noted that multinationals complicated the regulation of corporate conduct across national borders due to the limited capacity of some nations and civil societies. Notably, the weakness of the international legal framework, lack of formal powers by global bodies such as the United Nations and the World Bank, and the absence of political support undermined the prevention of corporate misconduct. However, Abdulrazak, Ahmad and Quoquab (2016) advised that to increase the acceptance of CSR programs in a multicultural setting, organizations needed to differentiate between the instrumental and normative bases of CSR initiatives while assessing the legitimacy of CSR effort at the planning stage and factoring in the cultural concerns of stakeholders. The cultural, religious and globalization influences on the CSR concept are important in understanding the CSR motives of Dnata and SGS.
While it is widely accepted that CSR links companies to society, there is no agreement on what motivates CSR actions or how this relationship should be secured and maintained. Some firms confess that they are coerced to have CSR programs by regulation, legislation and industry practices (Tennant, 2015). This gives credence to the legitimacy and institutional theory, in which organizations seek operational legitimacy and industry acceptance by adopting the norms and behaviors of other dominant companies in the industry or according to the expectations in the society and industry. Other companies used CSR as a ‘marketing gimmick’ as supported by the stakeholder perspective in which CSR could be viewed as an enabler of financial returns by placing the firm in good public light (Tennant, 2015). Gond et al. (2017) brought in a psychological perspective and behavioral framework to CSR motivations by discussing the individual drivers, processes and reactions towards CSR. Therefore, internal and external forces influenced the CSR actions undertaken by firms. The forces motivating CSR actions at Dnata and SGS have not been studied or compared.
Benefits of Corporate Social Responsibility
Organizations derive various benefits from engaging in corporate social responsibility although until recently, many companies felt that social activities yielded no benefits to the owners, investors and employees and hence, were not beneficial to the firms. Many studies have revealed the economic, political, legal, cultural, social, environmental, and organizational benefits of CSR. Others argue that CSR delivers benefits to not only the society but also to the employees, the customers and the business. For instance, Forbes Magazine reported that companies needed to embrace CSR because it pushed innovation, cost-saving, long-term thinking, customer engagement and employee engagement (Epstein-Reeves, 2012). In the same vein, Chernev and Blair (2015) explained why corporate social responsibility was a display of social goodwill benefiting the consumer perceptions of product performance and in turn, organizational performance. Similarly, Korschun, Bhattacharya and Swain (2014) found that CSR could deliver observable, positive employee behavioral changes. Employees identified with firms engaging in CSR activities that resonated with their sense of self, which improved employee-costumer identification and in turn, their job performance. Likewise, Ferreira, P., & Real de Oliveira, E. (2014) demonstrated that internal and external CSR practices improved employee engagement, although internal practices motivated more engagement than external practices. Saeidi et al. (2015) demonstrated that CSR could deliver financial success through enhances reputation, improved customer satisfaction and increased competitive advantage.
Contrastingly, Slack, Corlett and Morris (2015) extended the debate by exploring the different levels of employee engagement with CSR. They concluded that employee engagements was impeded at the organizational level by the absence or poor visibility of CSR culture, misalignment of CSR strategy to personal and business objectives, and poor communication. In the book, Development-Oriented Corporate Social Responsibility, Blowfield, Karam and Jamali (2017) observed that multinational corporations were uniquely positioned to spread good CSR practices and supplement the development efforts of governments in developing countries. However, in the same book, Jamali, Karam and Blowfield (2017) argued that multinational corporations in developing countries were unable to respond to the concerns of local communities because of the centralized and strategic approach to CSR. Therefore, although Dnata and SGS have international operations, the benefits derived by the local communities from their CSR activities have not been compared.
Corporate Social Responsibility Activities
There is great diversity in the CSR activities undertaken by organizations depending on their understanding of the CSR concept, context, motivation and resources, among others. The CSR activities range from simple acts of philanthropy to complex society-focused projects and sustainability strategies. According to Pistoni, Songini and Perrone (2016), organizations can adopt the defensive, resign, accommodative, obstructionist, proactive, or offensive strategy in their approach to CSR. They can also use the citizenship, reciprocal, altruistic or stakeholder strategy, depending on the organizational focus. For instance, the altruistic approach focuses on philanthropy to cement the long-term relationship between the company and its community while the stakeholder strategy focuses on maximizing financial gains for stakeholders in the short-term (Pistoni, Songini & Perrone, 2016). Moreover, three categories of CSR commonly found in the literature include philanthropy, sponsorship, cause-related marketing (De Jong & Van der Meer, 2017).
Corporate social responsibility standards have emerged to direct organizational behavior at the national and international levels. De Colle, Henriques and Sarasvathy (2014) listed various stands in use currently, namely ISO 14001, 9000, and 26000, AA 1000, and SA 8000. They also included the Global Reporting Initiative (GRI) guidelines, Ethical Trading Initiative (ETI), responsible care, and UN global compact as codified standards that also guide CSR activities.
The types of CSR activities at Dnata and SGS need to be categorized and compared to determine whether they meet their intended goals. Similarly, the CSR standards used by the two companies have not been studied.
Ground handling services industry and CSR
Ground handling services support the aviation industry by providing cabin, catering, passenger, baggage, fuel, cargo and ramp services to aircrafts and airports. The ground handling business made over 80 billion US dollars compared to the aviation industry, which raked in about 700 billion dollars in 2013, according to Center for Aviation (2014). Besides, according to Mordor Intelligence (2019), the industry was projected to grow by more than 8.5 % between 2019 and 2024 because of growing air passenger traffic, privatization of airports and the use of advanced technologies. Much of this growth was expected from the Middle East, which was centrally located between the East and the West, and within 8 hours from most of the world’s population (Macheras, 2019). Although the ground handling service sector has been deregulated, especially in the western market, monopolistic structures continue to exist in the Middle East and Asia (Tomová, Trgiňa & Sedláčková, 2015). Both SGS and Dnata provide ground handling services for Saudi Arabian airlines and the Emirates, which are owned wholly and spatially by their respective governments, respectively (Tomová, Trgiňa & Sedláčková, 2015). Specifically, Saudi Arabia Airlines owned 52.5 % of SGS while Dnata was a wholly-owned subsidiary of The Emirates Group (Aljazira Capital, 2018; The Emirates Group, 2019).
The industry is structured as self-handling by full-service airlines, airport-owned companies or as third-party service providers (Steer Davies Gleave, 2016). However, Center for Aviation (2014) reported that the industry players were susceptible to reputation damage and financial losses aircraft damage, baggage loss, cargo spoilage and delayed flights, which invited expensive litigations. Moreover, like airlines, ground handlers were under increased pressure to act responsibly by conserving the environment, using resources sustainably, and benefiting their communities in addition to behaving ethically as enterprises. Specific actions such as reducing greenhouse gas emissions, combating resource wastage, using energy efficiently, reducing reliance on fossil fuels, driving innovations in alternative energy, participating in animal and environment conservation programs, and contributing to community development were included in the CSR strategies of ground handling companies.
Dnata and SGS dominate the ground handling sector in the Gulf region and are poised to grow from the increased air traffic demand, the influx of tourists, significant government investment, and cheap aviation fuel (Al Mashah Capital Limited, 2015; Macheras, 2019). Dnata and SGS commanded 62.5 and 95 % of their domestic markets (Aljazira Capital, 2018; Steer Davies Gleave, 2016). However, Dnata operates in foreign countries as well (Steer Davies Gleave, 2016). The CSR activities of Dnata and SGS are closely related to those of their affiliated airlines, as full-service national carriers. For instance, Dnata has initiatives such as the Stop program to improve ethical behavior, the dnata4good program to undertake social programs and partnerships, purchase of eco-friendly equipment to reduce emissions, and training of employees to fit in a multicultural environment (Dnata, 2019; The Emirates Group, 2019).
Qualitative research using secondary data will be used in this study. Qualitative research is preferred for its ability to provide a detailed and extensive understanding of phenomena in organizations (Tracy, 2019). In this regard, it would enable the researcher to determine which CSR activities and why Dnata and SGS undertake them. Moreover, it allows the use of various methods through which to conduct the study and assess the information that would be used to achieve the research objectives and consequently, answer the research question (Tracy, 2019).
Secondary research used information from publication and other archived sources to extract useful information. Secondary data is cost-effective to access and saves on time as well since the researcher does not need to collect the massive data first hand (Walliman, 2017). Secondary data will be collected from highquality sources such as peer-reviewed journal articles, company reports, organizational and industry reports, articles from reputable media houses and organizational websites, and expert commentaries, which can be easily accessed online.
Publications not older than ten years will be selected because of their relevant and current information. An online search will be performed using keywords such as CSR in the aviation industry, CSR in the ground handling services industry, CSR at Dnata, CSR at SGS, sustainability reports of Dnata and SGS, among others. The data will be analyzed textually and thematically to unearth the CSR activities in the two companies.
Results and discussion
The results of the analysis will be presented using texts, tables and figures to facilitate the answering of the research question. The results will include the CSR activities in the two companies, the motives behind the activities, and the alignment of these initiatives with the corporate strategies of the firms. The CSR activities will be compared to determine which good efforts are present in Dnata but absent in SGS.
Conclusion and recommendations
The study will be concluded by answering the research question, ‘which are the good corporate social responsibility initiatives at Dnata that can be adopted by SGS?’. From this answer, recommendations on which CSR activities that SGS should adopt will be made.
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