Comparing the Corporate Social Responsibility (CSR) of Saudia Ground Series Company (SGS) in Saudi Arabia and Dnata Company in United Arab Emirates  

Posted: December 22nd, 2022

Comparing the Corporate Social Responsibility (CSR) of Saudia Ground Series Company (SGS) in Saudi Arabia and Dnata Company in United Arab Emirates  

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Abstract

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 aviation traffic grows at 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. The CSR strategy that SGS should adopt from Dnata will be recommended to help SGS improve its competitive advantage in the Gulf region.    

Comparing the Corporate Social Responsibility (CSR) of Saudia Ground Services Company (SGS) in Saudi Arabia and Danata Company in United Arab Emirates

Introduction

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 aircraft and passengers. Data from Statista indicate that global air passenger traffic grew by 7.4% in 2018 and was projected to grow by another 5% in 2019 (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 eight 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% respectively of the aircraft fleets in the GCC region. They also have the most airports in the region, with Saudi Arabia boasting 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 of the aviation industry, which has a significant environmental footprint. In addition, this sector closely deals with people such that the quality of its services significantly influences customer and public relations. To sustain their 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. 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 programs, 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 taken by 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:

  1. To identify the corporate social responsibility initiatives of Dnata.
  2. To determine the corporate social responsibility initiatives of SGS.
  3. To compare the corporate social responsibility initiatives of Dnata and SGS.
  4. To determine the good corporate social responsibility initiatives at Dnata not present at SGS.
  5. 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 at 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 enhance its attractiveness as a ground-handling service provider in the Gulf region and prepare it for diversification and international expansion. 

Theoretical framework

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) argue that since these three mainstream theories are complementary rather than in competition, they provide 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 conform to industry norms and adopted homogenous characteristics due to institutional pressure. This provides them with legitimacy and guarantees 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 other things. Moreover, all stakeholders have the same right for equal and fair treatment by their companies. However, managers tended to meet the expectations of the most resourceful stakeholders while ignoring the insignificant ones (Fernando & Lawrence, 2014). Therefore, companies engage 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) observe that the CSR concept is 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) shows that sustainability constructs, such as the triple bottom line (TBL), are increasingly being used to guide CSR worldviews. As such, the corporate social performance of enterprises can 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 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) argue that the Western concept of CSR conflicts with the Chinese one, adding 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) highlight the importance of the religious influence of corporate behavior. They show 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) note that multinationals complicate 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 undermine the prevention of corporate misconduct. However, Abdulrazak, Ahmad and Quoquab (2016) advise that to increase the acceptance of CSR programs in a multicultural setting, organizations need to differentiate between the instrumental and normative bases of CSR initiatives while assessing the legitimacy of CSR efforts 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 companies 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 use 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) bring 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 influence 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 reports that companies need to embrace CSR because it pushes innovation, cost-saving, long-term thinking, customer engagement and employee engagement (Epstein-Reeves, 2012). In the same vein, Chernev and Blair (2015) explain why corporate social responsibility is a display of social goodwill benefiting the consumer perceptions of product performance and, in turn, organizational performance. Similarly, Korschun, Bhattacharya and Swain (2014) find that CSR can deliver observable, positive employee behavioral changes. Employees identify with companies engaging in CSR activities that resonate with their sense of self, which improves employee-costumer identification and, in turn, their job performance. Likewise, Ferreira, P., & Real de Oliveira, E. (2014) demonstrate that internal and external CSR practices improve employee engagement, although internal practices motivate more engagement than external practices. Saeidi et al. (2015) demonstrate that CSR can deliver financial success through enhanced reputation, improved customer satisfaction and increased competitive advantage.

Slack, Corlett and Morris (2015) extend the debate by exploring the different levels of employee engagement with CSR. They conclude that employee engagement is 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) observe that multinational corporations are 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) argue that multinational corporations in developing countries are 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. 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 a defensive, resigned, accommodative, obstructionist, proactive, or offensive strategy in their approach to CSR. They can also use a 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, and 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) list various standards in use currently, namely ISO 14001, 9000, and 26000, AA 1000, and SA 8000. They also include the Global Reporting Initiative (GRI) guidelines, Ethical Trading Initiative (ETI), responsible care, and UN global compact as codified standards that guide CSR activities.   

The types of CSR activities at Dnata and SGS should 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 aircraft 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 is centrally located between the East and the West, and within eight 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 Arabia Airlines and the Emirates, which are wholly owned by their respective governments (Tomová, Trgiňa & Sedláčková, 2015). Specifically, Saudi Arabia Airlines owns 52.5% of SGS while Dnata is 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, the Center for Aviation (2014) reports that the industry players are susceptible to reputational damage, financial losses, aircraft damage, baggage loss, cargo spoilage and delayed flights, which invite expensive litigation. Moreover, like airlines, ground handlers are 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 are 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 command 62.5% and 95% respectively 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). Dnata also issues regular sustainability reports about its environmental and social performance, which enhance its reputation as an ethical company. On the other hand, SGS conserves the environment by lowering its energy usage through technology, use of modern equipment and automation of its systems. It also benefits the society by advancing the Saudization agenda through training of indigenous citizens (SGS, 2015). Although the company regularly reports about its financial performance to enhance accountability, it does not publish a sustainability report that can be used to assess its social and environmental performance. From the literature, Dnata engages mainly in CSR activities that focus on the community and environment beyond its industry, whereas SGSfocuses on internal organizational programs.  

Methodology

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 uses information from publications 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 high-quality 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 text, 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. The Stop program is an incident disclosure program used at Dnata to enhance ethical behavior. SGS does not have a similar initiative and therefore may be losing a valuable opportunity to improve its reputation internally and externally.     

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 will be made on which CSR activities SGS should adopt. The incident disclosure program used at Dnata, called ‘Stop’, is recommended to SGS.

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