Booz & Company

1. Jeddah, April 2013 Booz & Company Sustainable CSR Saudi CSR Forum 2013 Session I: Achieving a Triangular Partnership in Social Responsibility By Salim Ghazaly (Principal Booz & Company) This document is confidential and is intended solely for the use and information of the client to whom it is addressed.

2. CSR is about businesses internally integrating and externally impacting social, economic and environmental concerns What is CSR? CSR is a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis Social Social success is defined by the adherence of the company to fair and beneficial business ethics towards labor and the community Triple Bottom Line (TBL) approach defines the economical, social and environmental performance of a company as a criteria to measure its overall success Environmental Economic CSR Environmental success is defined by the ability of business practices to reduce harm and increase benefits to the environment Economic success is defined by the capability to achieve business sustainability and answer stakeholders financial needs and aspirations The Global Reporting Initiative (GRI) has pioneered the development of the world’s most widely used sustainability reporting framework setting out the principles and indicators to measure and report their economic, environmental, and social performance Source: Desk research, Booz and Company analysis

3. CSR has evolved from risk mitigation to creating value and becoming a source of competitive advantage CSR Value Creation and Strategic Benefits CSR Reporting of Top 250 Fortune 500 companies increased from 52% in 2005 to 85% in 2010 Brand Equity Value of CSR CSR Strategic Benefits - CXO’s Perspective (Survey of ME Executives) (2010) CLIENT EXAMPLE 2% Estimate Enterprise Value of the Firm USD 1.4 Bn 3% 1 Estimate Value of Brand Equity USD 270 Mn 2 Estimate Value of CSR Component USD 35 Mn (13%) 58% 3 40% 40% 33% 30% Maintain/Build Strong Reputation Attract and Retain the Best Employees Foster Innovation Capture New Markets and Market Share Attract New Customers Client CSR program will range depending on the level of sophistication of the program. USD 35 million represents CSR value corresponding to a best in class program Strongly Disagree Neutral Strongly Agree Disagree Agree Source: Branding Insider, Booz & Company analysis

4. CSR clearly results in growth, human development, innovation, and better environmental performance CSR Correlation with Development Indices The Arab Responsiveness Competitiveness Index vs. Growth Competitiveness, Human Development, Innovation, and Environmental Performance Indices • Clear positive correlation between front end policies regarding responsibility and actual growth competitiveness in the Arab World • Governments and business leaders in the region have a strategic interest and various levers to activate: • Increase national competitiveness • Increase national income • Achieve social benefits • Promote human development and innovation • Etc. Key Takeaways 6 5 R2 = 0.66 R2 = 0.75 Growth Competitiveness Index Global Innovation Index 3 0 0 53 60 68 50 60 70 Arab Responsibility Competitiveness Index Arab Responsibility Competitiveness Index 1 R2 = 0.80 Human Development Index R2 = 0.18 Environmental Performance Index 0 53 60.5 68 53 60 68 Arab Responsibility Competitiveness Index Arab Responsibility Competitiveness Index Source: 2009 Responsible Competitiveness Index, 2009 Growth Competitiveness Index, Booz & Company analysis

5. In developing countries in particular, CSR is perceived as a means of social and economic development ILLUSTRATIVE Perception of CSR (Developed Vs. Developing Countries) Citizens want “Core” CSR Projects Citizens Want CSR to Promote National Development Ensuring products are safe/healthy Increasing global economic stability KSA Education Employability Not harming the environment Reducing human rights abuses Treating employees fairly Helping reduce rich-poor gap Ensuring responsible supply chain Supporting charities / community projects Providing quality products / services at the lowest pric Solving social problems China Worker Safety Countering Pollution Applying same high standards globally Supporting progressive government policies Developed Countries Developing Countries Source: Corporate Socieal Responsibility Monitor 2009, Booz & Company analysis

6. To ensure sustainable CSR, companies need to coordinate and align with governments, academia, and civil society organizations ILLUSTRATIVE Sustainable CSR Framework • Provide regulatory incentives • Issue CSR legislations • Institutionalize CSR Governments Coordinate on National Development Goals Companies • Seek and Challenge CSR commitments from companies • Advocate CSR regulations Civil Society Organizations Partner on Social Issues Build Awareness Around CSR • Integrate CSR in academic curriculum • Support CSR research Academia Source: Booz & Company analysis

7. The MENA region has started witnessing some emerging CSR trends, however several steps could be followed going forward ILLUSTRATIVE Current MENA Trends and the Way Forward MENA Trends Looking Forward Engage Senior Leaders MENA Companies Joining UN Global Compact (*) 34% have CSR guidelines 67%: CSR benefits our company 10% communicated CSR goals • Majority in Iraq (61), UAE (41), Syria (32), and Egypt (36) • Only 4 in KSA +259 65%: CSR is our responsibility 3% have CSR office Strengthen Corporate Governance and Transparency Bank Muscat: Full-fledged CSR Department “Al Muhaidib Group: Corporate Governance Creates a CSR Agenda” 2003 2012 Integrate with the Operating Model Social Businesses / Entrepreneurship Proliferation Both internal and external CSR should be part of the business strategy EXAMPLE Egypt - Care with Love • Improve the living conditions of those in need for short or long term health care • Provide Job opportunities for unemployed young people in the field of health care Looking Forward Leverage Business Capabilities Employee Skills Technology Capabilities Social networks Partner with Experts Greater Autonomy to MNC MENA Subsidiaries Civil Society Organizations Public-Private Partnerships (PPP) • Donate books and provide teacher training to132 schools in 11 countries across the ME • More than 250 HSBC volunteers helping with community events • The program was awarded an International Business Award for CSR Program of the Year in the ME Social Business Ventures Measure Results Currently: Measure Input Target: Measure Results (*) A strategic policy initiatives for businesses committed to aligning their operations and strategies to 10 principles in the areas of human rights, labor rights, environment, etc. Source: Corporate Social Responsibility Monitor 2009, Booz & Company analysis

8. In addition, a successful CSR environment requires efforts from government, private sector, and non-governmental organizations ILLUSTRATIVE CSR Impact Assessment Government Academia Civil Society Governments have an evident interest in CSR as it is a very cost-effective means of enhancing sustainable development World-class academic institutions play an important role in promoting CSR through their curricula, regional academia should follow Civil society organizations are growing in the region and attracting more support as governments are partnering with them Synopsis Enact Legislation to Promote CSR (e.g. corporate governance laws) Include CSR in Higher Education Partner with Private Sector Companies Develop a CSR Institutional Framework Train Teachers on CSR Lend Credibility to CSR Initiatives Provide CSR Incentives Include CSR in School Plans Monitor Private Sector and Government Performance Potential Activities Provide CSR Training and Launch Promotional Campaigns Produce CSR Research Promote “Venture Philanthropy” Partner with Companies on CSR Initiatives Source: Booz & Company analysis

9. Over time, Booz & Company CSR program developed to become integrated within the company’s DNA Management Consulting CSR Maturation Process High • Intensive interactions through high profile programs and partnerships • Mainly with pro-bono consulting services, on-going support, etc. • Opportunistic engagement with selected organizations • Mainly in the form of co-marketing effort, employee volunteerism, fundraising, etc.. • Indirect engagement • Limited scope of activities • Mainly in the form of monetary and in-kind donations Resources / Investment Current Booz & Company positioning Philanthropic Transactional Integrative Low CSR Maturation