UAE – The S in ESG

The fundamental pillar of Environmental, Social, and Governance (ESG) is the social principles implemented by an organisation to instil ethical policies, ensure stringent governance, and strive for environmentally sustainable business practices. Social sustainability is paramount for corporate entities given its significant impact on business operations and reputation. ESG-focused corporate policies not only attract sustainability-conscious investors but also enhance overall corporate image.

In the second of our series on ESG, we consider the social pillar and the regional developments.

Employment Standards

The main legislation that applies to all businesses operating in the UAE concerning employment matters is Federal Decree Law No. 33 of 2021 (UAE Labour Law), along with its Implementing Regulations. Some free trade zones in the UAE have their own employment regulations, but ultimately, all employees, whether employed by a business operating within a free zone or “'onshore”' in the UAE, are subject to the UAE Labour Law.

Key Requirements:

Normal Working Hours: The maximum prescribed working hours for an adult employee is eight hours per day (excluding a one-hour break) or 48 hours per week. Shift workers are permitted to work a maximum of 56 hours per week.

Rest Breaks: Employers must allow employees to take a rest break of not less than one hour after working for five successive hours.

Weekly Rest Day: Employers are required to give employees one rest day per week.

Special Circumstances: During Ramadan, working hours are reduced by two hours each day. A mandatory afternoon ban on outdoor work during the summer months is also imposed.

Young Workers: Those aged 15 to 18 are subject to specific regulations, including a maximum of six hours per day of work and restrictions on working between 7:00 p.m. and 7:00 a.m. Employers must obtain consent from guardians and ensure proper conditions for young workers' employment.

Overtime Pay: Employees working beyond regular hours are entitled to overtime pay, which is at least 25% of the basic salary for normal overtime and 50% if the overtime falls between 10 pm and 4 am or on the employee's day off or a public holiday. Alternatively, employees can be given a day off in lieu of overtime pay where overtime is worked during the employee’s day off or a public holiday.

Limits on Overtime: Overtime should not exceed two hours per day or 144 hours in any three-week period. Certain categories of workers are exempt from these provisions as outlined in the Implementing Regulations.

Health & Safety

UAE Labour Law mandates that all employers establish and enforce health and safety regulations within the workplace. These regulations must be prominently displayed, and employees are obligated to adhere to them to ensure their own safety and that of their colleagues. Employers must provide essential facilities and access to medical services. For construction and industrial sectors with a workforce of 500 or more, employing an Emirati health and safety officer is mandatory.

Employers are responsible for providing necessary measures to protect workers from work-related injuries and diseases, including informative boards, appropriate training, and regular evaluations. Workers must use provided protective equipment, follow employer instructions, refrain from actions that endanger safety, and comply with all occupational health and safety directives. It is imperative that workers avoid any actions that could jeopardize health and safety standards for themselves and others in the workplace, contributing positively to the social aspects of ESG.

Diversity & Inclusion

The UAE stands as a model of tolerance and acceptance, committed to fostering diversity and inclusion in all aspects of society. This commitment is enshrined in various laws and initiatives that promote fairness and equality.

Anti-Discrimination: Article 4 of the Labour Law prohibits discrimination based on race, colour, sex, religion, national origin, social origin, or disability. Female employees are entitled to receive the same wage as their male counterparts for the same or equivalent work.

Protection for Women: Article 30 safeguards women's rights by prohibiting employers from terminating employment solely due to pregnancy.

Emiratisation: The UAE has expanded its Emiratisation initiative, mandating the employment of UAE Nationals in both public and private sectors. This initiative aims to increase the participation of UAE Nationals in the workforce, thereby enhancing their contribution to the economy and fostering a sense of belonging and empowerment.

Human Rights and Modern Slavery

The UAE actively participates in international efforts to uphold and protect fundamental freedoms. As a signatory to various international treaties, the UAE demonstrates its dedication to promoting equality, justice, and dignity for all individuals. The UAE has ratified key conventions and collaborates with international bodies like the UN Human Rights Council to advance human rights globally.

National Human Rights Authority: Established under Federal Law No. 12/2021 to promote and protect human rights within the country.

Anti-Human Trafficking Laws: The UAE has stringent laws against human trafficking and forced labour, with dedicated national committees to address these issues. The UAE's Labour Law explicitly prohibits forced labour under Article 14, reinforcing its stance against modern slavery practices.

Privacy and Cybersecurity

Corporate entities face growing pressure to adopt ESG principles while ensuring privacy and cybersecurity measures are in place. Recent legislative reforms in the UAE have addressed data protection and cybersecurity:

UAE Data Protection Law: Effective from 2 January 2022, regulating the processing of personal data in line with international best practices.

DIFC and ADGM Data Protection Laws: Providing frameworks to protect and regulate data processing, aligning with global standards.

Cyber-attacks and threats can affect an organisation's reputation and overall finances. By disclosing cybersecurity and data security policies within the ESG context, companies exhibit transparent reporting, instilling confidence in consumers and investors that their data will be safeguarded.

Sanctions

The UAE is a member of the United Nations and implements UN Security Council Resolutions, including sanctions to combat terrorism, money laundering, and prevent financing terrorism. These measures can include economic and trade sanctions and specific bans or restrictions.

Corporate entities in the Middle East, with connections to international markets, must be aware of global legislative developments affecting their operations. The Executive Office of the UAE implements provisions of Cabinet Decision No. 74 of 2020, ensuring compliance with international sanctions and maintaining lists of individuals and organisations associated with prohibited activities.

Financial institutions and designated non-financial businesses and professions (DNFBP) are required to:

• Register: The Executive Office website notifies registered DNFBPs of any amendments to the maintained lists.
• Screen: Regular screening should be conducted against current or potential customers and prior to entering new business relationships.
• Implement Freezing Measures: Immediate action should be taken against listed persons or organisations without prior notice.
• Notify: Immediate notification to the authority of any business relationships with listed persons or organisations.
• Internal Controls: Implement internal controls and procedures to ensure compliance.
• Internal Policies: Establish internal policies and procedures prohibiting staff from notifying third parties of any freezing or other measures.
• Cooperate: Ensure accurate information is submitted and cooperate with the Executive Office and relevant authorities.

Comment

The social pillar of ESG is at the core of corporate responsibility, demonstrating how an organisation manages social risk. Corporate entities and financial institutions must implement ESG policies, codes of conduct, and procedures to prevent corruption, such as bribery and money laundering. Compliance with regional labour laws, rights, and protections, as well as adherence to UN Security Council Resolutions, is crucial. Failure to do so could result in substantial fines and reputational damage, emphasising the importance of ESG principles in today's corporate landscape. The commitment to social responsibility not only fosters a positive corporate image but also ensures sustainable growth and resilience in a rapidly evolving global market.