From Business to Social Business: Western and Islamic ...
Thoughts on Economics
Vol. 21, No. 01
Corporate Social Responsibility: Contemporary
Thought and Islamic Perspectives
Dr. Mohammed Shamim Uddin Khan(
Dr. Md. Nesarul Karim((
Abstract: [Corporate Social Responsibility (CSR) has over the past few decades greatly evolved both in concept and practice mostly due to the ever changing society. Corporate social responsibility (CSR) has gained an unprecedented global focus and attention because it touches on many salient issues in the present business world. Many scholars of this field have attempted to provide theoretical, moral and ethical groundings for CSR initiatives. However, these attempts have been sometimes criticized for problems relating to its validation, clarity of thought, inconsistency, and overall failing to give adequate ethical guidance. On the other hand, Islam influences business and socio-economic life in a way similar to the conventional understanding of CSR. While the shifting boundaries of acceptable behaviour in conventional business are set by laws, regulations, and corporate governance guidelines, Islamic business is governed by divine principles covering values such as fairness, integrity, equality, and morality. The main objective of this paper is to focus the concept of traditional CSR as well as Islamic CSR. It discusses the Islamic alternative to the various theories underpinning CSR. Both Islam and conventional CSR have humanitarian grounds, and the linking of the two concepts will no doubt result in positive synergies, that we have attempted to sketch briefly in this paper.]
1. Introduction
Corporate Social Responsibility (CSR) has over the past few decades greatly evolved both in concept and practice mostly due to the ever changing society. In this period, the relationship between business and society has changed radically. Key drivers of this change have been globalization of trade, the increased size and influence of corporations, the repositioning of governments and the rise in strategic importance of stakeholder relationships, knowledge, and brand reputation. CSR often overlaps and synonymous with many features of other related concepts like corporate sustainability, corporate accountability, corporate reputation, corporate stewardship or corporate citizenship, corporate social opportunity or responsible business. Corporate social responsibility (CSR) has gained an unprecedented global focus and attention because it touches on many salient issues in the present business world.
CSR is constantly evolving and incorporates different approaches depending on circumstances and needs. The CSR started to figure prominently in public debate in the wake of increasing social problems such as poverty, unemployment, race, gender and religious discrimination, and pollution (Boatright, 1993). These social problems are natural outcomes of continuous transformation in the market due to economic globalization, technological revolution as well as demographic and political changes (Dunning, 2003). Organizations are now under increasing pressure to behave in socially responsible ways, to help to solve social problems, to protect the environment by producing/ providing environment-friendly products /services, support charities, exhibit ethical behaviour and moral management.
Much contemporary discussion of CSR, however, has largely been based on a Western orientation. On the other hand, Islam influences business and socio-economic life in a way similar to the conventional understanding of CSR. Indeed, values and principles that have been central to Islam since the time of the holy Prophet Muhammad (Peace and Blessings be Upon Him) 14 centuries ago may serve as a foundation for notions of CSR similar to the West. While the shifting boundaries of acceptable behaviour in conventional business are set by laws, regulations, and corporate governance guidelines, Islamic business is governed by divine principles covering values such as fairness, integrity, equality, and morality. The need for honesty, truthfulness and fair dealing is also inherent in Islamic business, which has wide ranging implications across the full spectrum of business activities.
Islamic ethical principles provide a broader framework for CSR. In terms of responsibility and accountability, Muslims believe that they will be accounted for whatever they do in this world in the hereafter (life after death). In Islam, Muslims verily have to fulfill the will of Allah (SWT) in order to seek the promised rewards in the hereafter. Thus, it requires that every deed and word in this world must be in line with the Islamic teachings. The importance of accountability to the man’s life also has been manifested by the Prophet Muhammad (PBUH) as “each one of you is a guardian and each guardian is accountable to everything under his care”. Individuals are expected to feel socially responsible for others in the community. In general, the aim of the Islamic economic system is to allow people to earn their living in a fair and profitable way on the basis of Shariah without exploitation of others, so that the whole society may get benefits. Islam also emphasizes the welfare of the community over individual rights.
The paper is organized as follows. Following an introductory part, Section 2 gives the objectives of the study. Section 3 provides the methodology of the study. In section 4, theoretical framework is discussed. In section 5, contemporary thoughts of CSR are provided. Section 6 describes the basic concepts of business in Islam. In Section 7, the philosophy of corporate social responsibility from Islamic perspective is discussed. In section 8, the paper provides a discussion. The final section offers a conclusion.
2. Objectives of the Study
Objectives of the study are as follows:
i) To shed light on the concepts of contemporary thoughts of traditional CSR
ii) To focus on the principles of Islamic CSR
iii) To identify the similarity and dissimilarity of both traditional CSR and Islamic CSR
iv) To highlight the positive impact of Islamic CSR on the society.
3. Methodology of the Study
The study is a desk and descriptive research. It is based on the secondary data. As the nature of the study is theoretical, we review the existing available literatures like published books, journals, magazines and research works related to the conceptual, theoretical and foundational framework of corporate social responsibility of both traditional and Islamic models. Brief discourse analysis and commentaries on the literatures available provide comparative overview on the basic elements of the traditional and Islamic CSR approaches. The data and information have been analyzed and stated carefully in order to make the study more informative and useful to the people interested in this area.
4. Theoretical Framework
4.1. Corporate Social Responsibility (CSR)
In the contemporary environment, business organizations have to face up to the task of meeting the expectations of a wide variety of their stakeholders. A ‘stakeholder’ is normally defined as someone that can be considered to have an interest (a stake), indirect or direct, in the company’s operations. The UN defines ‘stakeholder’ as “any group or individual which is affected by the operations of the Company”. Such stakeholders could be external like unions, consumers, suppliers, society, government, creditors, and shareholders or internal like employees, managers, and directors. Each category of stakeholders has a distinct interest and expectations from an organization. Owners (shareholders) expect an organization to maximize profits, the government expect organizations to meet their tax and legal obligations, management staffs also expected to meet performance and growth targets, non-managerial staff expects high rate of pay and job security. Trade unions expect to enjoy better working conditions and minimum wage requirements, customers expect organizations to offer value, quality, customer care and ethical products. Consumers are demanding more out of organizations than simply a quality product at a low price (Bhattacharya and Sen, 2004). Consumers expect organizations to demonstrate congruence with some social values as part of their contribution to the community (Maignan, et al, 2005). Creditors on their part expect organizations to have good credit scores, secure new contracts and have more liquidity and finally the local community from which organizations taps its resources expect the organizations to offer them jobs and take environmental issues seriously. Corporate organizations have to meet the expectations of each group of stakeholders without jeopardizing that of another stakeholder group. To meet these expectations with some reasonable degree of effectiveness, organizations are obliged to adopt a broader agenda which takes these diverse expectations into account. Nowadays, corporate organizations address these broad agenda by becoming socially responsible. Corporate Social Responsibility is thus increasingly adopted by organizations operating at national and international levels to address these varied stakeholder’s expectations.
4.2. Social Business (SB)
Social Business is a business where an investor aims to help others without considering any financial benefits for himself. This does not imply that social business is a losing concern rather it generates enough income to cover its own costs. Any surplus amount is invested to the expansion of the business or for increased benefits to the society. The social business is a non-loss, non-dividend-company dedicated entirely to achieving a social goal – everything is for the benefits of others and nothing is for the owners – except the pleasure of serving humanity. Philanthropy money may be a source for creating necessary funds for social business.
4.3. Islami Business
Islami Business means the activities of earning through investment keeping in mind the Islamic principles and the ultimate satisfaction of Allah (SWT).
5. Corporate Social Responsibility: Contemporary Thoughts
CSR is a broad concept and a variety of meanings and definitions of it are used in the literature, making it is not only interesting but also controversial and multidimensional. It is found that some researchers distort the definition of corporate social responsibility or performance so much that the concept has becomes morally vacuous, conceptually meaningless and utterly unrecognizable. Business ethicists and management theorists have given much effort and have devoted to develop the best-suited relationship between business and society. However some scholars have managed to come out with some definitions of corporate social responsibility as shown below.
Carroll (1979) takes a more academic approach and considers economic and legal expectations of a corporation within the context of ethical and philanthropic responsibilities. He defines CSR as “the social responsibility of business encompasses the economic, legal, ethical and discretionary (philanthropic) expectations that society has of organizations at a given point in time”. On the other hand, European Commission (2002) defines it as “CSR is a concept whereby companies integrate social and environmental concern in their business operations and in their interaction with their stakeholders on a voluntary basis”. CSR concept has a purpose to encourage a corporation to consider the interests of society by taking responsibility for the impact of the organization’s activities on customer, employees, shareholders, communities and the environmental in all aspects of its operations.
The structure of CSR is also important. Lantos (2001) explains CSR as having three components – ethical, altruistic and strategic. CSR can be understood as the voluntary integration of social and environmental concern into business operations and interactions with stakeholders (Enquist, Johnson and Skalen, 2006). Tullberg (2005) explains that the distinction between social and environmental issues is not generally observed. As Reich (1998) points out, the question here is not whether companies should be responsible to society, but rather how they should be responsible. There are many ways to categorize company responsibility (Tullberg, 2005). One of the most common is the triad of economic, environmental and social responsibility – known as the ‘triple bottom line’.
Many authors also try to say that CSR can serve as a proactive business philosophy and effective marketing tool to compete and sustain competitive advantage in the present hyper competitive and fast changing environment (Chahal and Sharma, 2006). CSR means obtaining a competitive sustainable advantage. The World Commission on Environment and Development (1987) defined sustainable development as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”
Freeman (1984) formulated the stakeholder theory suggesting that owners are not the only claimants of a business entity rather there are some other stakeholders like employees, suppliers, customers, environment etc. whose interests are to be protected.
There are a numerous of definitions of CSR, each valuable in their own right, defined to fit the organization in question. The majority of definitions integrate the three dimensions: economic, environmental and social aspects into the definition, what is usually called the triple bottom line. One of the most used and quoted model is Carroll´s (1991) ‘pyramid of corporate social responsibility’. It indicates that CSR constitutes of four kinds of social responsibilities; economic, legal, ethical and philanthropic. Carroll considers CSR to be framed in such a way that the entire ranges of business responsibilities are embraced.
The major theories that underpin the practice of CSR in the literature are Classical view, Social contract theory, Instrumental theory, Legitimacy theory and Stakeholder theory. According to Classical View of CSR, Friedman (1967) mentions that corporation has no responsibility except making profit in a legal way. The social responsibility of business is to increase its profits. CSR may only incur additional cost and hence would jeopardize overall performance and sustainability of an organization (Pikston and Carroll, 1996).
The central idea of the social contract theory is how to relate a corporation to society. According to this theory, business must act in a responsible manner not only because it is in its commercial interest to do so, but because it is part of how society implicitly expects business to operate (Moir, 2001). Furthermore, according to the social contract paradigm, a business is regarded as a social institution and should join with other social structures like the family, educational system and religious institutions, to help enhance life and meet needs. In other words, the corporate social contract theory holds that business and society are equal partners, each enjoying a set of rights and having reciprocal responsibilities. There is direct and indirect mutual need between business corporations and society.
In an attempt to further legitimize the role of corporations in society, an instrumental theory has developed CSR as a strategic tool to achieve economic objectives. The proponents of this theory assert that the business may choose to support some social programmes for reasons of good image (public relations), competitive advantage or other strategic reasons without jeopardizing the interests of its primary stakeholders, namely the shareholders.
Legitimacy theory states that CSR is a response to the environmental pressures involving social, political and economic forces. According to this theory, organizations look for a balance between their actions and how they are perceived by outsiders and what is thought by society to be appropriate (Deegan, 2002; Suchman, 1995; Tomer, 1994).
A different approach in defining and developing CSR is provided by stakeholder theory, which has indeed become one of the most important and frequently cited theories in the literature. According to this approach, paying attention to the needs and rights of all the stakeholders in a business is a useful way of developing socially responsible behaviour by managers (Maignan and Ferrell, 2004).
In general, CSR is essentially a concept whereby companies decide voluntarily to contribute to better society and a healthier environment. At present, a good number of companies are promoting their CSR strategies as a response to a variety of social, environmental and economic pressures. They want to send a signal to their stakeholders that companies are investing for their future and they expect that the voluntary commitment will help to increase their profitability (EU, 2001). There is a competitive advantage that companies believe they can reap by being socially responsible. They foresee that by communicating effectively about their social, environmental and economic contributions, they can strengthen their brand, enhance their corporate reputation with customers and suppliers and attract and retain a committed and skilled workforce. The commitment towards CSR will in turn lead to better performance in terms of profitability, competitiveness and risk management.
The conspicuous difference between the accounts of the concept and definition of CSR offered by the literatures, there is wide agreement on the central features of what is commonly called the doctrine of CSR. In sum, CSR addresses some of the important aspects like environmental, human resource, philanthropic and human right (Table -2). Changes in the objectives of business (i.e. from economic selfishness to value laden approach) and finance as discussed above, is the result of social reactions (i.e. inequality, increasing gap between rich and poor, human misery and poverty etc.) Appropriate approach is still in quandary.
6. Business Concept in Islam
Islam is the complete code of life. It guides every aspect of human life including spirituality, business and social justice by encompassing an entire socio-economic system (Rice, 1999). The idea of active participation in the material world is part of the concept of Tazkiyah or growth and purification (Gambling and Karim 1991). This means that Muslims are required to take part in worldly activities with the proviso that any material enhancement and growth should also lead to social justice and spiritual enhancement. One of the key characteristic of the Islamic ethical system is that it allows no separation between the individual in public and in private life. Rice (1999), for example, argues that the separation of ‘Church’ and ‘State’ in many western societies has lead to the view that religion is essentially a private matter, whereas the Islamic ethical system allows no such separation. As a result, Islam influences the decision making of its followers in every sphere of their lives.
Business organization has always played a vital role in the economic and social life of all people throughout the ages (Abeng, 1997). In Islam, business activities are not undertaken to satisfy only material needs and wants but more importantly it should be undertaken to fulfill religious obligations and to achieve other non-material objectives such as to secure social needs. The aims of the Islamic system of business are therefore not primarily materialistic but are based on the concepts of human well being and achieving a good life overall. It stresses community values, socio-economic justice and a balance between the material and spiritual needs of its followers (Ahmad, 1971, Chapra, 1992). Social responsibility refers to the obligations that an organization has to protect and contribute to the society in which it function (Beekun, 1997). It also draws heavily on the life of the Prophet Mohammad (PBUH) himself and of many of his companions and contemporary followers who were actively engaged in trade and laid down the ethical foundations of Islamic business practice at the inception of the religion (Bhatia, 2004). Allah (SWT) has permitted trade i.e. buying and selling, but forbidden riba or interest in business transactions (Qur’an, 2:275). He has encouraged mankind to mutual cooperation in good deeds, but forbidden in helping one another in furthering evil and enmity (Qur’an, 5:2).
An Islamic market is characterized by certain norms that take care of the interests of both buyer and seller. There are some rules of ethical discipline in Islamic commercial transactions without which business contracts would be regarded as lacking perfection in the light of the code of good manners, decency and ethical excellence. They are all pursuant to the concept of lawful and unlawful and reflect features of social responsibility in every aspect of the transactions. Although there are numerous rulings, a number of them are shown in Table-1.
Table 1-: Islamic Tenets of Business Transactions
|Halal (Lawful) Business Transactions |Haram (Unlawful) Business Transactions |
|Keenness to earn legitimate earning |Interest (Riba) |
|Trade among mutual consent |Dealing in prohibited (Haram) items |
|Truthfulness |Sales of Al-gharar (uncertainty, risk, speculation) |
|Generosity and leniency |Arbitrarily fixing the prices |
|Trustworthiness |Hoarding of foodstuff |
|Honouring and fulfilling obligations |Exploitation of one’s ignorance of market conditions |
|Fair treatment of workers |Cheating and fraud |
Islam has introduced the concept of Halal (lawful) and Haram (unlawful) in its economic system. In fact the foundations of Islamic economy have been laid down on this concept. The concept reigns supreme in the realm of production as well as consumption. Certain means of earning livelihood and wealth have been declared unlawful such as interest, bribery, gambling and games of chance, speculation, short weighing and short measuring, business malpractices etc. Unlawful means of earning are strictly forbidden and a follower of Islam is permitted to earn through lawful and fair means. Similarly, in the field of consumption certain items of food are unlawful such as dead animals, blood, swine flesh and animals slaughtered in the name other than that of Allah (SWT). Even expenses on certain items such as drinks, narcotics, debauchery, prostitution, pornography, things that promote obscenity and vulgarity, lotteries and gambling are strictly inadmissible.
Thus, in Islam man can also earn virtues by doing business as instructed by Allah (SWT) and demonstrated by Prophet Muhammad (PBUH). Finally, business in Islam is value laden and encompasses both worldly life and the life Hereafter.
7. Corporate Social Responsibility: An Islamic Perspective
Before the discussion of the concept of CSR from Islamic perspective, it is required to know the Islamic worldview. The fundamentals of Islam such as Aquidah (belief and faith), Ibadah (worship) and Akhlaq (morality and ethics) are not subject to change, their manifestation in secondary areas like economics, business and other worldly activities would require flexibility and development according to time and space (Kamali, 1989). This is embodied in Islamic shariah which is central to the worldview of Islam. Normally the Shariah as Islamic law (Dusuki, 2008), but the boundaries of Shariah extend beyond the limited horizons of law (Sardar, 2003). The concept of CSR in Islam encompasses a broader meaning embracing the Taqwa (God consciousness) dimension by which corporation as group of individual, assuming the roles and responsibility as servants and vicegerents in all situations (Dusuki, 2008). Islami Corporate Social Responsibility (ICSR) derives itself from core principles of the holy Qur’an. The major foundational principles for ICSR are discussed below:
(a) Unity
The unity of Allah (SWT) is the first principle of Islam and of everything Islamic. Allah (SWT) is the One and absolutely One. He has created the earth and the universe and willed that man would be entrusted by vicegerency on the earth that he might construct and diffuse well on it and face reckoning in the Hereafter. These are the eternal facts brought forth to man by revelation. The source of all Islamic ethical notions comes from the faith in the Unity (Tawhid) of Allah (SWT). All other axioms of Islamic ethics and principles of theology originate from this concept of Unity (Naqvi, 1981). According to Islam, the purpose of man is to live his life in submission and obedience to Allah (SWT). He is supposed to fulfill this purpose within the ethical framework devised by Allah (SWT). The Qur’an states that Allah (SWT) is the one and only creator of this universe who is worthy of worship. Everything in the heavens and on earth belongs to Him. Based on the axioms of Tawhid, the main objective of social responsibility should be to demonstrate responsibility not only to Allah (SWT), provide one single direction in guaranteeing a unified spirit in adhering to Shariah (Moten, 1990). In other words, by accepting unity of Allah (SWT), all commercial activities must adhere to shariah and non-conformance will result in sin (Haniffa et al., 2002). The concept of Tawhid also signifies man’s role as vicegerent on earth. As khalifah, mankind is not free but responsible and accountable to Allah (SWT).
(b) Vicegerency and Trusteeship
Man is considered to be the vicegerent (khalifah) of Allah (SWT) on earth and thus trustee of Allah (SWT)’s resources. The principle of vicegerency denotes that mankind is the representative of Allah (SWT) on earth and as such Allah (SWT) has entrusted mankind with stewardship of Allah (SWT)’s possession. Allah (SWT) states this principle in the holy Qur’an, “I will create a vicegerent on earth” (Qur’an, 2:30). In short, Hasan (1992) summarizes the dual function of man as follows: (i) man as servant of Allah (SWT) and (ii) man as khalifah on earth. As a servant of Allah (SWT), man needs to worship Allah (SWT), seeks Allah’s (SWT) pleasure, follow Allah’s (SWT) laws, be good to all creatures of Allah (SWT) and to refrain from doing destruction. On the other hand, as khalifah on earth, man needs to enforce the shariah in his life, maintain the harmony and peace; protect the environment and to fulfill the good manner such as advisor, trust, truthfulness and wise.
The concept of khalifah refers to the role, status as well as the mankind’s responsibility to themselves and to the Ummah (community) as a whole. This means every human being are responsible to all Muslims for whatever deeds they have done with regards to the resources that Allah (SWT) has entrusted to him. As a khalifah, leaders in business organizations are required to practice CSR essentially from the principle of Tawhid. From an Islamic perspective all possessions, wealth, expertise, abilities, positions and power belongs to Allah (SWT). Mankind is only trustees. As trustees, it is imperative that human being manage these possessions to the best of their abilities to create a maximum added value in social responsibility with an intention of creating benefit to the community as a whole (Bardai, 2002).
The principle of divine accountability flows from the vicegerency principle and denotes that individuals will be accountable to Allah (SWT) for all their actions on the Day of Judgment. A faithful will be trustworthy and truthful in business transactions; will not discriminate in any form; and will not hoard his wealth avariciously. This principle is expounded in several verses of the holy Qu’ran, like “Allah (SWT) takes careful account of everything (Qur’an, 4: 86) and “Then shall anyone who has done an atom’s weight of good shall see it and anyone who has done an atom’s weight of evil, shall see it (Qur’an, 99: 7-8).
(c) Rights and Responsibilities
According to the concept of vicegerency, the right attitude towards human beings is the mutual sacrifice and cooperation to fulfill the basic needs of all, to develop the entire human potential and to enrich human life as a whole. Shariah guarantees basic property rights to individuals, but these rights must always conform to Shariah rules and ethics as well as preserve and protect the interest of collective well-being (Iqbal and Mirakhor, 2003). Humans have been endowed with intellectual to choose either to be righteous or otherwise. Naqvi (2003) asserts that the vicegerency role allows free will for human beings. The relativity of freedom that a person enjoys in Islam means that they will not voluntarily transgress the social limits of individual freedom. The purpose of imposing constraints is not to diminish human freedom but to prevent humankind from arbitrary self-interested social behaviour. This has a great implication for how human beings conduct their affairs.
As a trustee of Allah (SWT)’s resources on earth, mankind has been given the free will to steer his/ her own life. Unlike other creatures in Allah (SWT)’s universe human can choose their behaviour to be either ethical or unethical. A faithful is expected to fulfill all obligations, contribute to the well being of the society; and most important – be benevolent (God-like) – need to watch over the welfare of weak and destitute members of the society. Every individual is accountable and ultimately responsible for his own actions.
(d) Justice and Equilibrium:
The concept of vicegerency implies that human beings are equal and human interactions should be based on trust, equity, and justice (Parvez, 2000). They should not attempt to dominate or wrong each other; instead they should collaborate and support each other towards fulfilling their role of vicegerency (Omar, 1996). Justice includes the fulfillment of promises, pacts and contracts. Muslims should be honest, sincere, and truthful in their business dealings and ensure exactness in terms of promised product specifications such as weights, measures and other attributes. Islam condemns cheating and lying and commands businessmen to be straightforward in all their dealings and transactions. Finally, justice in Islam also includes the equitable distribution of wealth. Although inequality in terms of wealth is justified, each member of society has the right to be provided with the basic needs regardless of a man’s race, religion, language, colour, sex, age, health and status.
The principle of enjoining good and forbidding evil encapisulates the responsibilities that Allah (SWT) places on Muslims as trustees and vicegerents. Allah (SWT) says, “The believers, men and women, are protectors one of another; they enjoin what is just, and forbid what is unjust (Qur’an, 9: 71) and in another verse, Allah (SWT) states “You are the best peoples, evolved for mankind, enjoining what is just, forbidding what is unjust, and believing in Allah (SWT) (Qur’an, 3: 110).
Various elements of life must be equilibrated to produce the best social order, which is a conglomeration of natural and social forces creating social harmony. Equilibrium must be practiced by means of fair competition in an open market; treating others fairly and maintaining fairness in wage distribution and avoid discrimination in all forms. In this respect Allah (SWT) says, “Give full measure when you measure and weigh with a balance that is straight” (Qur’an, 17:35).
The concept of trust, in Islam, is inseparably linked with responsibility, implying that the wealth that is entrusted to a human being is indeed a responsibility that he will be called to account for in the Hereafter. Thus an individual’s responsibility to discharge his trust by spending his wealth is limited in several ways. These include spending in accordance with the divine wishes; not engaging in illegitimate activities such as hoarding, helping the poor, and spending moderately because prodigality is both a social waste and a cardinal sin (Kamali, 1989; Mawdudi, 1977; Naqvi, 2003; Parvez, 2000). The combination of these principles denotes a divine accountability for each Muslim to enjoin good and justice and forbid evil and injustice. These core principles therefore constitute the basis of individual social responsibility.
8. Discussion:
Although traditional and Islamic principles of CSR have dissimilar values and aspirations as they are operating in different philosophical grounds, there are numerous lessons that each can gain from the others. In particular, some of the dimensions of CSR in Islamic principles may resemble those which have already been recognized in the contemporary thoughts. Hence the areas and dimensions of CSR as proposed by many traditional theoreticians and international bodies may well be applied to Islamic business firms since most of them are consistent with the spirit and teachings of Islam. Table -2 substantiates this claim.
Table 2: Comparison between Contemporary Views and Islamic Perspectives on CSR
|Dimensions of CSR |Contemporary CSR Issues |The Selected Corresponding Sources from the Qur’an |
| | |and Hadith of the Prophet |
|Human Resources |(a) Providing adequate training, |(a) “Your employees are your brethren upon whom |
| |maintaining equipment in good working |Allah (SWT) has given you authority. So if one has |
| |condition, maintaining a safe working |one’s brother under his control, one should feed |
| |environment. |him with the like of what one eats and clothe him |
| |(b) Protecting in health and safety. |with the like of what one wears. You should not |
| |(c)Treating employees fairly in terms of|overburden him with what he cannot bear, and if you|
| |wages, working hours etc |do so, help him in his job.” Sahih Muslim Vol. 3, |
| |(d)Promoting equal opportunities |Hadith No.4093. |
| |(e) Investing in education and training |(b) “Allah (SWT) (SWT) says: “I will be an opponent|
| | |to three persons on the Day of Judgement: One who |
| | |makes a covenant in My Name, but he proves |
| | |treacherous, One who sells a free person (as slave)|
| | |and eats the price, and one who employs a labourer |
| | |and gets the full work done by him but does not pay|
| | |him wages” Sahih al-Bukhari Vol. 3: Hadith No. 2. |
|Human Rights |(a)Respecting workers’ rights, dealing |(a) “I have made oppression unlawful for Me and for|
| |with workers problems quickly and |you, so do not commit oppression against one |
| |fairly. |another” Sahih Muslim, Vol.3 Hadith No. 6254. |
| |(b)Promoting human rights. |(b) “help thy brother whether he is the oppressor |
| |(c)Ensuring operation respect human |or the oppressed i.e. If he is an oppressor he |
| |rights |should prevent him from doing it, for that is his |
| |(d)Refrain lending to oppressive regime |help and if he is oppressed he should be helped |
| |or companies violating human rights |(against oppressor)” Sahih Muslim, Vol.3, Hadith |
| | |No. 6246. |
|Environmental |(a) Good pollution control, waste and |(a) “And when he goes away, he strives throughout |
| |recycle policy |the land to cause destruction therein and destroy |
| |(b) Energy conservation |crops and animals. And Allah (SWT) does not like |
| |(c) Not doing things that harm the |mischievous act. (Qur’an, 2:205). |
| |environment. |(b) “And do no mischief on the earth, after it has |
| |(d) Undertake initiatives to promote |been set in order, but call on Him with fear and |
| |environmental responsibility. |aspiration. Indeed the mercy of Allah (SWT) is near|
| | |to the doers of good. (Qur’an, 7:56). |
|Philanthropic |(a) Help solve social problems |(a) “And fear Allah (SWT) as much as you can, |
| |(b) Supporting charities and community |listen and obey; and spend in charity for the |
| |projects |benefit of your own souls. And those saved from the|
| |(c) Participate in management of public |covetousness of their own souls; they are the ones |
| |affairs |who achieve prosperity.” (Qur’an, 64:16) |
| |(d) Play a role on society goes beyond |(b) “Every Muslim must pay sadaqah (charity). The |
| |profit maximization |companion asked, “What about someone who has |
| | |nothing to give?” The Prophet replied, “Then let |
| | |him do something with his two hands and benefit |
| | |himself. That will be charity.” The companion |
| | |asked, “But what if he cannot do that?” The Prophet|
| | |replied, “Then he can help someone who is needy.” |
| | |Again they asked, “But what if he cannot do that?” |
| | |The Prophet replied, “Then he should enjoin the |
| | |doing of good.” Still again they asked, “But what |
| | |if he cannot do that?” The Prophet replied, “Then |
| | |he should give respite from evil, for that is a |
| | |form of charity.” Al-Bukhari’s Adabul Mufrad, |
| | |Hadith No. 225. |
Freeman’s theory is quite in line with the Islamic justice system but the difference is that Islam gives each stakeholder its due right in the organization and all stakeholders are not treated equally but rather in relation to their relative stake. It is very evident from various sources that Islam supports every activity aimed at the welfare of the whole society. Emphasis on justice and equilibrium in every aspect of life are explicitly mentioned in the holy Qur’an. Qur’an says, “Be just! Justice is the nearest to piety” (Qur’an, 5: 80). In another occasion Qur’an says, “Dealt not unjustly and ye shall not be dealt with unjustly (Qur’an, 2:279). The verses imply that all stakeholders get what is just for them i.e. customers are entitled to fair prices, quality goods, information disclosure, employees are entitled to salaries, health care, education, share in profits. Environment is a natural resources that belongs to all inhabitants and therefore, companies are not allowed to exploit it for their private monetary benefits doing so is an injustice to other claimants. Table-3 summarizes in turn the relationships of different stakeholders to the firm in light of the Islamic ethical principles.
Table 3: Obligations and rights of different stakeholders from an Islamic perspective
|Stakeholder |Description |Related Islamic Ethical |
| | |Principle |
|Shareholder |Rights: Profits, personal property, control |Trusteeship Justice, |
| |Obligation: Transparency, ethical activities, fairness, |Trusteeship, Unity |
| |investment in Halal businesses. | |
|Employees |Rights: Fair compensation, dignified life, good working conditions |Justice, |
| |regarding safety, fair work load, secrecy, training and development|Trusteeship, Unity |
| | |Justice, |
| |Obligations: No cheating in work, optimal utilization of time and |Trusteeship |
| |skills, privacy of company policies, working as a Trustee of owners| |
|Supplier |Obligations: Declaration of quality, exact quality and quantity, |Justice, Unity |
| |safety, hygienic production process, fair prices, no hoarding, | |
| |provision of Halal products and services | |
| |Rights: fulfilling contracts by the company regarding credit and |Justice, Unity |
| |other terms | |
|Customers |Obligations: fulfilling contracts by the company regarding credit |Justice, Unity |
| |and other terms | |
| |Rights: Declaration of quality, exact quality and quantity, safety,|Justice, Unity |
| |hygienic production process, fair prices, no hoarding, provision of| |
| |Halal products and services | |
|Competitors |Fair competition |Justice, |
| | |Trusteeship, Unity |
|Environment |Stewardship |Trusteeship |
|Community |Obligations: Considering the company as a community member and |Justice, Unity |
| |helping it succeed. Meeting contractual obligations | |
| |Rights: Clean environment, employment, health, education, no | |
| |discrimination, company meets all its obligations as a member of |Justice, Trusteeship, |
| |the community |Unity |
|The Poor |Although they don’t contribute anything substantial to the company,|Justice, |
| |yet, they have the right, in form of Zakat, to monetary benefits |Trusteeship, Unity |
| |from the company and other stakeholders | |
Source: Ullah and Jamali (2010)
Conventional CSR or Social Business (SB) suffers from the limitation that beyond economic considerations, it takes a clear psychological impetus to be responsible towards society and environment. In this case one of the basic philosophical foundations of Islam is Tazkia which implies man’s relationship with fellow human beings and with natural environment based on revitalizing Tawhid. Tawhid entails responsibility on mankind not only towards Allah (SWT) but also towards society and environment. Islam allows its followers to do business for profit without harming others and environment. Man has been asked to ensure justice to stakeholders and welfare to mankind (Qur’an, 16: 90). Islam has also encouraged people to take appropriate measures to check concentration of wealth in few hands, redistribute resources, minimize social gap and share their fortunes with other unfortunates in society by paying zakat, sadakah etc.
Islamic perspective to business is universal, not the outcome of any social reaction. Islamic world view regarding the ownership and management of resources is based on Tawhid, which entails that all resources belong to Allah (SWT). Mankind as the Khalifa (vicegerent) of Allah (SWT) has been given the ownership of resources as trustee. As trustee man has been encouraged to utilize and expand resources in the way Allah (SWT) has approved. Allah (SWT) says, “He has made subservient to you whatever in the heavens and the earth and granted you His bounties manifest and hidden (Qur’an, 31:20; 4: 32-33; 16:12-14; and 45: 12).
From the above discussion, it is clear that the teachings of Islam not only appear to be in close conformity with the concept of traditional CSR but in many respects go further than the minimum standards adopted by this framework. In particular Islam exceeds the requirements of the traditional CSR in a number of important ways. First, it appears to be wider in scope, for example in the transparency requirements in business transactions. Second, it has a clear codification defining what is permissible or Halal and what is forbidden or Haram. Third, Islam has an explicit enforcement mechanism in the Shariah as well as in community enforcement and the final sanction of the accountability of the individual for unethical behaviour on the Day of Judgment (Qur’an 17:13).
9. Conclusion
The aim of the Islamic economic system is to allow people to earn their living in a fair and profitable way without exploitation of others. As Islam seeks to protect the rights of both primary and derivative stakeholders, Islami business are bound to observe the principles of trust, equity, equilibrium, and fairness, benevolence and excellence in their own operations but also scrutinize the operations of their portfolio companies on the basis of these criteria. Islamic values expressed in ethical conduct are an integral part of the obligations laid upon the individual and the community. Rules of CSR derive from the underlying principle of assuring the economic well-being of the whole community on the basis of universal brotherhood, justice, mutual accountability, truthfulness and transparency, protection of minorities, adequate disclosure and equitable distribution of wealth. Thus, Islam presents distinctive values and special characteristics of CSR with aim to uphold and maintain the principle of social justice not only to the shareholders of the firm but also to the all stakeholders. While the shifting boundaries of acceptable behaviour in conventional business are set by laws, regulations, and corporate governance guidelines, Islamic business is governed by divine principles covering values such as fairness, integrity, equality, and morality. Hence, it can easily be argued that Islamic CSR exceeds and dominates the conventional CSR.
Finally, the synthesizing characters of traditional CSR systems with Islamic values as accountability, transparency, social justice, and trustworthiness, help companies to attract investment and improve their performance. It also assists companies to realize their corporate objectives, protect shareholders rights and other requirements. It is argued in turn that these Islamic ethical principles have a great affinity to the concept of CSR. Both Islamic and conventional CSR have humanitarian underpinnings, and the linking of the two concepts will no doubt result in positive synergies.
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( Professor, Department of Finance and Banking, University of Chittagong.
(( Associate Professor, Department of Finance and Banking, University of Chittagong.
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