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Unlocking the power of good governance

An innovative approach to good governance of their regenerative tourism destination along Saudi Arabia’s west coast led to The Red Sea Development Project winning the 2021 CGIUKI ESG Initiative of the Year Award.

There is no denying that the past two years have had a profound impact on the global economy. The COVID-19 pandemic, environmental damage and other pressures have shown companies how quickly external risks can affect their operations. Disruption in economic activity has redefined the culture of organisations, pushing business leaders to take a broader look at their purpose and mission through the lens of environmental, social and governance (ESG) concerns. These matters are becoming more prominent every day and are an increasing area of focus for investors and stakeholders alike. Now, more than ever, businesses must have pragmatic, resilient and sustainable solutions in place to operate efficiently, ensure business continuity and optimise their programs for risk management. They must have well-defined policies, structures and plans in place that prioritise security, ethics and compliance for the long term.

A prime example of the success of strong and effective governance practices in ESG is The Red Sea Development Company (TRSDC), the developer behind ambitious tourism destinations along Saudi Arabia’s Red Sea Coast, The Red Sea Project and AMAALA. TRSDC is proud to have been recognised for its ESG efforts by being awarded the ESG Initiative of The Year at The Chartered Governance Institute UK & Ireland’s 2021 Awards for efforts that go beyond ‘business as usual’.

Leading the way

TRSDC’s endeavors to foster a culture of integrity and accountability continue to yield dividends. An effective governance framework guides the company’s ambition to create truly ground-breaking tourism destinations in the most accountable, transparent and responsible way, while promoting trust among shareholders and other stakeholders. Despite the challenges that come with operating a diverse business with multiple teams stationed across various sectors, the company’s approach is centred on the core principles of transparency, fairness, accountability and responsibility.

‘At TRSDC, governance is more than simply adhering to rules and regulations; it binds all functions of the business together’, explains Dr. Maryam Ali Ficociello, Chief Governance Officer at TRSDC. ‘Since the outset of our master-planning, we have been clear on what we stand for as an organisation. We recognise that our commitments are ambitious, which is why good governance is imperative to keeping us accountable. Our holistic approach to structural governance, risk and compliance touches every aspect of our business, from construction to how we work with partners. Believing in and following these ethical standards is what unites our diverse delivery teams, and we are proud that all our employees are united by a set of common goals and behaviors that are central to our core company values.’

A comprehensive internal code of conduct sets out the legal and ethical behaviours for employees (from Board level to construction workers on the ground) and outlines priority commitments – be it respecting human rights, the protection of the natural environment or anti-bribery and anti-corruption policies. A dedicated supplier code of conduct ensures all external stakeholders subscribe to the same set of stringent ethical standards, while a subsidiary governance framework guides the set-up, governance and reporting requirements of TRSDC’s subsidiaries, both wholly and partially owned.

Binding these codes together is continual communication and consultation with internal and external stakeholders; an integral and essential component of the TRSDC’s risk management framework. A two-way process is established, such that informed decisions can be made regarding the level of risks and their management against the established criteria. In so doing, the company is able to facilitate the factual, timely, relevant, accurate and understandable exchange of information, while prioritising the confidentiality and integrity of information.

As part of the compliance infrastructure and to enhance transparency further, TRSDC has also created an anonymous whistleblowing platform that can be easily accessed by any employee to report suspected illegal or unethical behaviors. 

Several risk-related stakeholder engagement initiatives are also in place to ensure stakeholder alignment on TRSDC’s sustainability risk profile. For example, information around sustainability risk and market inflation risk is actively shared with all external stakeholders, from governmental bodies to regulatory entities, as well as sister projects. In 2020, TRSDC became the first developer in Saudi Arabia to achieve the ISO31000:2018 Risk Management System certification, providing assurance to stakeholders that all risk-management processes in relation to corporate functions and projects are up-to-date and aligned with international best practice.

Beyond good governance

As issues of sustainability take center stage worldwide, Dr. Maryam predicts that the role of governance will become even more instrumental in the coming years. She explains, ‘We are already seeing the Kingdom of Saudi Arabia spearheading this commitment to good governance in the field of sustainability. Sustainability has been at the heart of Vision 2030 since its inception. Momentum is building around Saudi Arabia’s ESG agenda, driven by an accelerated focus on achieving net-carbon neutrality by 2060, as recently announced by His Royal Highness Prince Mohammed bin Salman bin Abdulaziz, Crown Prince and Deputy Prime Minister, at the inaugural Saudi Green Initiative Conference. This commitment is aligned with the wider Vision 2030 ambitions to accelerate the energy transition, achieve sustainability goals and drive a new wave of investment.’

Good governance constitutes one of Vision 2030’s six overarching goals: ‘enhance government effectiveness’, which highlights the country’s commitment ‘to delivering the highest standards of transparency and accountability, managing finances efficiently and effectively, creating agile public organizations and implementing effective performance tracking.’ Vision 2030 also sets out the Kingdom’s aspirations with regard to inclusiveness, a key pillar for good governance of sustainable development. Vision 2030 promises to provide ‘opportunities for everyone – men and women, young and old – so they may contribute to the best of their abilities.’

For TRSDC, aligning with this wider ambition means going beyond the standard requirements and signing up to international frameworks and reporting structures. As a closed joint stock company, TRSDC is only required to implement limited corporate governance measures. However, the company has chosen to look to international leading practices and standards, such as adopting the Open Compliance & Ethics Group (OCEG) principled performance approach for an integrated governance, risk and compliance framework. We have also published our inaugural Sustainability Report that details our pioneering approach to sustainable development at The Red Sea Project, along with our achievements and challenges to date.

The report, titled Laying the Foundation for a Sustainable Destination, provides a comprehensive overview of our approach to integrating sustainability within our operations and the measures we have taken to deliver on our commitments. This includes achieving a 30% net conservation benefit by 2040, by putting in place measures to increase the biodiversity of the area being developed and enhance key habitats such as corals, mangroves, seagrass and land vegetation.

Importantly, we have developed the report in accordance with the internationally recognised Global Reporting Initiative (GRI) sustainability reporting framework and have demonstrated our alignment with the UN Sustainable Development Goals.

We have also implemented additional sustainability reporting measures in line with The Global ESG Benchmark for Real Assets (GRESB), allowing us to contribute to global, cross-industry collaboration on sustainable development.

To encourage the adoption of high standards of governance across the Kingdom, an Internal Control Toolkit was recently unveiled for organisations looking to emulate TRSDC’s best practices in governance. The toolkit, based on the committee of sponsoring organisations (COSO) model, offers step-by-step guidance, templates and tools that can be implemented through the different governance elements from day one. It constitutes TRSDC’s corporate strategy, departmental strategies, departmental policies, risk-management approach, internal audit and several other entity-level controls.

Harnessing technology

There is often a disconnect between how governance trickles down to subsidiaries and how it is owned, managed and administered. At TRSDC, technology will play a significant role in our guests’ experience at the destination. With our smart destination vision, we will embed cutting-edge technologies coupled with smart services across various aspects of our service offerings. We envision utilising digital technologies during our operations to improve visitors’ experiences and residents’ quality of life.

Additionally, we are implementing an integrated enterprise governance, risk management and compliance (EGRC) platform.

Charting the way forward

Testament to TRSDC’s holistic approach across all business streams, synergies across internal stakeholders, third-party providers and governments and regulators have helped to keep the economic wheels turning while mitigating risk and safeguarding the interest of the board, management, employees and shareholders.

Dr. Maryam confirms that this has laid a strong foundation for progress but building on this is the next critical step for her team. ‘Focusing on near-term shareholder value alone is no longer enough to ensure long-term business success’, she adds. ‘Sustained value creation requires that companies manage business performance to ensure that sustainability matters are continually addressed. Often, substantial value is destroyed when governance systems fail to address sustainability at large. I am confident that TRSDC’s bold vision for good governance can serve as an important template for other corporations as they make the shift towards operating in a more sustainable manner.’

Red Sea Development – winner of ESG Initiative of the year

Unlocking the power of good governance