On our recent trip to Saudi Arabia, we received a refresher lesson on globalization as soon as we stepped off the plane. In this conservative country steeped in Arab and Muslim history and tradition, all the big American and European retail chains are well represented, and you can neatly divide the young professionals into Blackberry and iPhone camps. One of our business meetings even began with a question about whether we had seen a recent edition of Oprah. More importantly, we found that another core element of globalization—corporate social responsibility (CSR) —is increasingly viewed as a key driver for global competitiveness of Saudi business.

Even as neighboring Dubai’s real estate bubble burst, Saudi Arabia has forged ahead on various efforts to diversify its economy, moving away from an historic reliance on oil to an emphasis on new industries and a strong commitment to promote its global economic competitiveness. Indeed, the World Economic Forum’s 2009 Global Competitiveness Index now ranks Saudi Arabia a respectable No. 28 worldwide, placing it ahead of Brazil, China, India, and Russia.

We visited Jeddah, a city of 6 million on the Red Sea, to launch a two-year program—with funding from the U.S. Department of State—focusing on sustainability and human rights within Saudi businesses and civil society organizations (see sidebar on “BSR Project to Support Human Rights in Saudi Arabia”). As the business and financial capital of the country, Jeddah is the logical starting point for BSR in Saudi Arabia. In our meetings with the Jeddah Chamber of Commerce and Industry (JCCI), our local partner ECO Consulting, the National Society for Human Rights (the country’s largest human rights organization), and a number of leading companies, we observed three key trends that will define how CSR evolves as it becomes a more widely integrated concept in the kingdom.

CSR with Saudi Characteristics

While Saudi business leaders have demonstrated a passion for CSR, they also typically hold a narrow definition of the concept. Here, the idea that business has a responsibility to help address social and environmental challenges is welcomed and becoming increasingly familiar. Representatives from the companies and institutions we met with know that sustainability and CSR have become requirements for business success in a global economy.

However, CSR in Saudi Arabia is still largely focused on corporate philanthropy and community engagement. The CSR priorities most often mentioned by companies were the role of business in tackling Saudi Arabia’s widespread unemployment (especially among the young), and the need for business to support education. Strategic CSR, addressing the social and environmental impacts associated with a company’s core business, is a much less familiar concept.

We’re encouraged by our conversations with the CSR staff at Saudi companies, where this focus on philanthropy was often viewed as an early phase in the still young CSR programs, to be followed by a second phase focused on the social and environmental impacts of the core business.

Islam as a Driver

While an early focus on philanthropy is not unusual in a developing economy that is beginning to explore CSR, a key driver of this approach in Saudi Arabia is Islam, which serves as the underlying value system in business culture as well as all other aspects of life in the kingdom. One of Islam’s core pillars, zakat, refers to the duty of all Muslims—individuals and companies—to give roughly 2.5 percent of their annual income to charity. It is often within the context of zakat that companies view their responsibility toward society.

While leading companies have begun forming new CSR departments that are separate from the corporate functions managing the zakat, these teams remain largely focused on similar community-engagement efforts.

We expect CSR to evolve over the coming years toward a broader, more strategic approach that encompasses core business impacts. Linking the larger definition of CSR beyond philanthropy to other core values of Islam will help speed this evolution in Saudi Arabia. Given the importance of giving back to society in Islam, and the impressive scale of the zakat programs in terms of budget and staff, it’s also likely that once broader, strategic CSR functions are established, they will be well resourced.

Empowering Women

Our local partner, ECO, is the first woman-owned and -led consultancy in Saudi Arabia. Working with ECO and a larger network of women activists and business leaders, it became clear to us that efforts aimed at women’s empowerment are integrally linked to the country’s evolving CSR agenda. Many of the CSR professionals we met with were women, for whom CSR provided the opportunity to hold high-level management positions within large corporations. At the same time, they have been and continue to be instrumental in shaping and marketing CSR in the Saudi business community.

In the future, these business leaders could create similar opportunities for women in business, particularly as the current political climate shifts slightly toward the liberalization of traditional gender roles. Bill Gates highlighted this recently when asked whether he thought the kingdom could become one of the world’s top 10 competitive economies by 2010. “If you’re not fully utilizing half the talent in the country, you’re not going to get too close to the top 10,” he replied.

Looking Ahead

With these trends in mind, we will be working with ECO and the JCCI over the coming months to develop a capacity-building program featuring training seminars on CSR and human rights for Saudi chambers of commerce and their member companies. In Saudi Arabia, the business-licensing process is managed by municipal chambers of commerce and industry like the JCCI, so these bodies serve as efficient, neutral entry points for advancing CSR and human rights efforts in the kingdom.

In addition to working with leading Saudi companies, BSR will train the National Society for Human Rights on business and human rights, helping the organization develop capacity in this area.

Several key human rights challenges for the kingdom, including women’s empowerment and the situation of migrant workers, can be addressed only if business plays a strong role. By establishing a dialogue among companies and civil society on the role of business in addressing these human rights challenges, we hope to help Saudi Arabia take the next step toward global economic competitiveness.