The Ethical Compass of Islamic Corporate Social Responsibility: A Path to Sustainable Impact

Abstract

This chapter seeks to evaluate the relationship between corporate social responsibility, ethics, and Islamic principles. It explores the moral underpinnings of Islamic business practices and shows how to use them to achieve long-term, beneficial results in the business sector. The ICSR framework places a strong emphasis on the values of inclusivity, social justice, and fairness. It also emphasises how crucial it is to balance the interests of all parties involved and advance the common good. Organisations can address social and environmental issues, advance moral business conduct, and develop an accountable and transparent culture by implementing ICSR practices. This chapter also guides on how Islamic principles and values can influence ethical business practices, which can have a beneficial and long-lasting effect on the environment and society.

1. Introduction

One of the central themes of human existence is ethics. It has always served as a source of inspiration for its adherents throughout the history of Islamic civilisation. Islam is a divine religion that provides moral guidance to people in all facets of life. When translating the word ethics into Arabic, the appropriate term is akhlāq. Its meaning is derived from a root that means to create, shape, give form, mould, or produce. The knowledge of morality (ilm ul-Akhlāq) is translated as ethics, moral sciences, or moral philosophy, despite the fact that the term akhlāq, which is a plural form of khulūq, refers to collections of distinct character traits. Islamic ethics can be defined as the process of moulding one’s behaviour and character to conform to the standards established by Islam’s sacred texts, the Qur’an and Hadīth. Islamic ethics differ from Western perspectives in this regard. Western sociologists contend that morality depends largely on an individual’s perspective on what is right or wrong.

Nonetheless, in Islam, the religious establishment that conveys a divine revelation to humanity is the source of ethics. Put differently, the Qur’an and Sunnah inherently serve as the foundation for akhlāq within the Islamic faith. The fundamental tenet of Islamic ethics is belief in a personal God, and morality is the endeavour of the individual and the community to get as close to Him as they can.¹ The Holy Book and the sayings and deeds of the Prophet Muhammad (S.A.W.), who has been called the best role model for all believers,² are the sources of all goodness and badness in behaviour and character traits. In general, the term “ethics” refers to the normative assessment of actions.

The incorporation of ethics and social responsibility into business practices is imperative at a time when the actions of corporations have profound effects on both society and the environment. This chapter explores the complex interrelationships between corporate social responsibility (CSR) and Islamic ethics, and how these relationships work together to create an ethical compass that points companies in the direction of long-term, positive effects. Islamic principles and values, which have their origins in the Quran and the Hadith, can provide a moral basis for businesses wishing to act in a socially conscious manner. A company’s reputation is improved when these values are in line with corporate social responsibility (CSR) practices, which also foster long-term advantages for the environment, society, and all parties involved.

2. Methods

The authors use a qualitative approach. This is a strictly exploratory study that uses desktop research, literature reviews, news articles, government publications, books, journals, and websites. The Holy Qur’an, the principal source of Shari’ah (Islamic law), provided the secondary data that supported the majority of the arguments made regarding the connection between Islamic principles, ethics, and corporate social responsibility. The sayings of the Holy Prophet Muhammad (S.A.W.) are discussed after this. The study analyses the long-term effects of Islamic CSR as an ethical compass with the assistance of synthesised data from institutional websites and published articles. In light of the research objectives, desktop research is considered adequate. The topic was further segmented into the following headings, namely: the foundation of Islamic ethics, corporate social responsibility: a global imperative, the ethical compass of Islamic corporate social responsibility, sustainability through ethical business practices, fostering corporate culture and long-term success for easier assessment and analysis.

3. The foundation of Islamic ethics

Islamic ethics are derived from the Hadith, or the sayings and deeds of the Prophet Muhammad, and the Quran, the sacred book of Islam. These moral guidelines offer a thorough foundation for moral behaviour and include ideals like justice, accountability, honesty, integrity, and compassion [3]. The significance of moral conduct is emphasised in both personal and professional contexts by the Quran and Hadith. For instance, the Quran contains verses that expressly prohibit deception, fraud, and unethical business practices [4]. These values form the cornerstone around which morally upright Islamic business operations are established. The basis of the Islamic worldview, according to Hossain and Siwar [5], is the idea of the “Oneness of God,” who rules over heaven, earth, and everything within it. Islam presents itself as a comprehensive way of life as well as a religion. Tawhid, the concept of God’s oneness, holds that everything is subject to God’s omnipotence and benevolent will [6]. Since humans are merely applications of God’s creation, adherence to Islamic Shari’ah is imperative [6, 7, 8, 9, 10, 11, 12, 13].

3.1 Islamic CSR (ICSR)

It’s a common assertion in the field of corporate social responsibility (CSR) that religion has shaped people’s values and behaviours, which have an impact on many aspects of business [13]. The three main foundational principles of ICSR are the vicegerency of humanity on earth, divine accountability, and the duty of mankind to enjoin good and forbid evil. ICSR is derived from core principles found in the holy Qur’an [14].

3.2 Al-Khilafa (vicegerency)

According to the principle of vicegerency, since humans are Allah’s stewards of His possessions, they serve as His representatives on earth. In the sacred Qur’an, Allah declares this idea: “I will create a vicegerent on earth”³; and Allah says again, “He is the one who has made you the earth’s inheritors”.⁴

3.3 Al-Hisaab (divine accountability)

The vicegerency principle gives rise to the principle of divine accountability, which states that on the Day of Judgement, people will answer to Allah for everything they have done. The holy Qur’an contains several verses that explain this idea. Two of them are: “Allah takes careful account of everything,”⁵ and “Everyone who has carried out an atom’s worth of goodwill then sees it, and everyone who has carried out an atom’s worth of evil will also see it”.⁶ A Muslim’s (i.e., one who submits to Allah’s will) actions are based on this divine accountability, which also serves as the foundation for Muslim representative organisations.

3.4 Al’Amru Bil Ma’aruf Wan Nahyu Anil Munkar (enjoining good and forbidding evil)

Enjoining good and prohibiting evil is the fundamental principle that sums up the duties that Allah assigns to Muslims in their roles as trustees and vicegerents. Allah says: “The Believers, both men and women, are protectors one of another; they forbid what is unjust (rejected) and enjoin what is just (accepted).”⁷ Allah also says in another verse, “You are the best of peoples, evolved for mankind, believing in Allah, forbidding what is unjust (rejected), and enjoining what is just (accepted).”⁸ This duty, which permeates every part of a Muslim’s life, is enormous. It consists of a prescription against negative (impermissible and not recommended) actions as well as a prescription towards positive (permissible and recommended) actions. Combining these ideas signifies that every Muslim has a divine obligation to uphold justice and goodness while prohibiting injustice and evil. Therefore, individual social responsibility is built upon these fundamental ideas.

The Qur’an, the Islamic holy book, and the Sunnah, the teachings of the prophet Muhammad, are the primary sources of Islamic socioeconomic theory [12, 15]. The Qur’an talks about jihad as well as politics, socialisation, economics, law, and literature. The prophet is the practical embodiment of the Qur’an, while the Qur’an itself provides the theoretical framework [5]. This theory’s principles and character depend more on morality and social duty than on economic viability [16]. Islam presents people as God’s representatives [5, 13]. Recognising that man has two missions to fulfil—first as Allah’s servant and second as His vicegerent or steward—leads to placing an emphasis on personal choice and striking a balance between responsible behaviour and piety. Man is accountable for his relationship with creation in the second relationship, but in the first, he is accountable to God as his servant. These two relationships coexist and are equally important in defining moral behaviour. Islam demands equilibrium and balance (‘adl), which translates to acting rationally and refraining from extremes.

Furthermore, Islam is by its very nature suited to all periods and locations. The most explicit principle is the framework of Masaleh Mursalah, or “unrestricted” public interest, which allows for the discussion and resolution of issues that are not defined by the conventional Shari’ah rules. Maslahah encompasses factors intended to advance profits or prevent losses while adhering to the traditional Shari’ah regulations of avoiding prohibited usury (Riba), deceit (Gharar), and ignorance (Jahal). The regulator can apply the framework of Masaleh Mursalah to achieve Masaleh on any other unrestricted issues [6, 7, 8, 9, 10, 11, 12, 13]. In addition, the Islamic Shu’ra principle, a variant of democracy, stipulates that every individual possesses the entitlement to assign their voice by casting a ballot for a reliable candidate [17]. Ultimately, Islamic ethics are applied to maintain sustainable standards of living, and since they bear similarities to many of the non-Islamic ethics that are currently in use, they can be justified in their application on a global scale [6, 7, 8, 9, 10, 11, 12, 13].

4. Corporate social responsibility: a global imperative

The idea that corporations should take into account the wider impact of their actions on society and the environment has given rise to the global imperative known as Corporate Social Responsibility, or CSR [18]. Although the specifics of corporate social responsibility (CSR) may differ between cultures and belief systems, the overall objective of the concept is always the same: to actively promote societal well-being rather than just maximise profits [19]. Combining CSR with Islamic ethics provides a distinctive and effective framework that helps businesses fulfil their social and ethical responsibilities. Like beauty, corporate social responsibility (CSR) frequently depends on the viewer. A strong vision that inspires executives and staff is essential to turning a company around in an ethical, economical, and strategic manner. The resolution of significant issues affecting numerous stakeholders necessitates the use of strategic leadership to establish objectives and direct organisational members in their pursuit of those objectives [20]. Moreover, the values, expertise, and experience of top management teams influence their strategic choices, which ultimately affect the performance of the company [21].

CSR essentially entails abstaining from actions that could inadvertently hurt stakeholders and making amends for any such harm. However, socially responsible behaviours vary depending on personal beliefs, as well as the context in which it is exhibited [22]. In Russia, for instance, CSR is typically seen as corporate philanthropy [23], which, despite being unfinished, plays a significant role in a company’s social performance [24]. The more comprehensive definition of CSR, which is defined as “clearly articulated and communicated policies and practices of corporations that reflect business responsibility for some of the wider societal good,” is, however, evident in the actions of a few Russian businesses, such as Troika Dialogue [25].

When violations occurred, stakeholders in developed economies realised that the actions were not only against the law but also immoral and at odds with the social responsibility of the companies. In transition economies, the challenge lies in developing a new framework for business ethics that is appropriate for the global arena and winning over all stakeholders, rather than trying to return the organisation to a widely accepted ethical foundation. The rebuilding process towards corporate social responsibility is not easy; Islamic CSR is trying to restore the ethical foundation, revamp the corporate culture based on that foundation, and establish corporate governance policies and practices reflecting those fundamental values. Islamic CSR requires an ethical turnaround that goes beyond a business turnaround. Wherever an ethical turnaround is needed, it is because the organisation’s reputation has either not yet been established or has been severely damaged by the unethical and even illegal actions of its executives.

Transformational leadership can be integrated with strategic leadership to improve understanding of how leaders communicate and carry out plans [26]. Developing information and control systems that can guarantee both the legal and ethical behaviour of organisational members is part of this process, as is introducing or reintroducing meaningful codes of corporate conduct and ethical behaviour. These can be demonstrated by corporate governance policies and procedures, which are frequently used as a means of informing stakeholders about the moral and cultural underpinnings of an organisation. Additionally, corporate governance is made very apparent to the general public. To compete globally, transition-economy companies must follow this path from an ethical foundation to corporate social responsibility (CSR) and sustainable competitiveness [23]. It is also required by developed-market companies that have experienced a loss of legitimacy and reputation as a result of corporate misconduct.

5. The ethical compass of Islamic corporate social responsibility

Islamic principles, which have their origins in the Hadith and the Qur’an, provide a comprehensive framework for business that places a strong emphasis on social justice, environmental stewardship, and moral behaviour. These principles can offer organisations looking to conduct themselves honourably and purposefully a framework for guidance in the context of contemporary business. Islam’s “adl” (justice) principle pushes companies to treat workers fairly, engage in fair trade, and refrain from engaging in exploitative behaviour. Fair pay, moral sourcing, and open communication with stakeholders are examples of how this can be demonstrated [27]. Islamic principles and values can serve as CSR’s moral compass. Businesses that integrate these values into their operations receive direction on how to make morally right decisions that are consistent with accountability, justice, and compassion. Another fundamental Islamic principle is reliability (amanah) [28]. Companies can demonstrate this by operating transparently, keeping their word, and guaranteeing the calibre and security of their goods and services. Maintaining trust can improve a brand’s reputation and increase consumer loyalty [29]. It is an extremely important Islamic virtue that each employee in an organisation must uphold in the course of conducting business. Everyone with a sense of stewardship will make the best use of the things entrusted to them as a sign of obedience to God. Instead of focusing only on profits, leaders should be evaluated on how well their wealth is managed in line with Islamic principles [30]. Businesses can use Amanah to promote trust and transparency in their interactions with stakeholders, workers, and consumers [31].

The idea of benevolence (ihsaan) pushes companies to go above and beyond the call of duty and pursue excellence in all that they do. Examples of this include offering outstanding customer service, contributing to community projects, and consistently innovating for the benefit of society [32]. The Islamic concept of khilaafah, or stewardship, over the planet emphasises the significance of environmental accountability. Companies can incorporate this value by cutting waste, conserving natural resources, and implementing sustainable practices [33]. Islamic jurisprudence is centred on the idea of “Maslaha,” or public welfare and well-being, which can serve as the impetus for CSR initiatives. Businesses that follow Maslaha give the environment and societal welfare top priority when making decisions [34]. Islamic alms-giving, or zakat, is a testament to the value of social responsibility. Zakat systems, which are designed to redistribute wealth and improve the lives of the poor, are institutionalised in many countries with a majority of Muslims. Companies operating in these areas demonstrate their commitment to social responsibility by frequently starting their charitable endeavours or contributing to Zakat funds [35].

An approach to commerce that is more moral, environmentally friendly, and socially responsible can result from incorporating Islamic principles into contemporary business processes. Islamic teachings, with their timeless wisdom, can provide invaluable insights and solutions as businesses tackle complex global challenges [36]. The intersection of Islamic law, sustainable development, and corporate social responsibility (CSR) offers a novel and relevant field of study in today’s globalised world. The combination of these three concepts can provide new perspectives and creative answers to current problems, which makes this field of study important and warranted [37]. There is a trend in the business world towards more sustainable and moral business practices. Companies are increasingly interested in learning how Islamic and other religious values can support their efforts to align their operations with global sustainability goals. Since Muslims make up almost 25% of the global population, it is imperative to comprehend how Islamic values, corporate social responsibility, and sustainable development interact [38].

6. Sustainability through ethical business practices

The objective of CSR is to have a long-term, positive impact on society and the environment. Companies may make sure that their corporate social responsibility (CSR) initiatives are long-lasting by implementing Islamic ethical business practices. Islamic ethics promote environmental sustainability by emphasising stewardship of the earth. Companies that incorporate this philosophy into their corporate social responsibility plans take an active role in resource conservation, sustainable development, and environmental preservation. This can involve taking steps to cut carbon emissions, save resources, and promote environmentally friendly goods.

An organism’s form and survival are ultimately determined by the complex interplay of physical, chemical, and biological factors that are present in its environment [39]. It includes all of the elements of nature that have an impact on living things, such as soil, plants, animals, water, air, and light. Islam affirms that Allah Ta’ala, the Almighty, created these natural resources with a purpose⁹: primarily to sustain human existence on earth,¹⁰ and as a platform for evaluating man’s morality in carrying out his trusteeship role. Regretfully, there are now numerous indications from the biosphere indicating that it is in great distress; it is finding it difficult to deal with the loss of ecosystems, acid rain, ozone depletion, natural resource depletion, and contaminated air, land, river, and ocean [39].

Islam makes it abundantly evident when Allah Ta’ala warns people against committing evil deeds and causing trouble on the earth¹¹ because the consequences will have a detrimental effect on human beings themselves. In other words, because of what mankind has done, Allah says to that effect, “mischief has appeared on land and sea, that Allah may give them a taste of some of their deeds, in order that they may turn back”.¹² Natural catastrophes and tragedies are frequently the result of their actions. Muslims are therefore required by religion to manage the environment responsibly, thereby demonstrating their trusteeship to Allah. Doing this shapes an environmental ethic and morality in Islam that shapes human attitudes towards the environment. Recognising the environment’s carrying capacity and acting upon it appropriately is crucial because, in contrast to other creations, men have the mental capacity to do so. This endeavour is regarded as Amanah (trust) to mankind that no other creation is prepared to undertake it¹³ aside from humans.

Social and economic activities are two ways that people interact with their surroundings and build the built environment. In this way, environmental sustainability creates a space where social and economic activities can continue, such as housing, commercial, industrial, tourism, and transportation. This differs from the traditional understanding of sustainability, which views the environment as one of the three pillars rather than as a space for social, economic, and human activity. While CSR and sustainable development have been extensively studied in Western contexts, there is a gap in the literature on how these concepts can be integrated with Islamic values. By examining this intersection, companies operating in nations with a majority of Muslims can get frameworks and techniques that are culturally appropriate and improve their corporate social responsibility programmes [40].

7. Fostering corporate culture and long-term success

According to Stoner et al. [41], “how we do things around here” has a big influence on an organisation’s performance. They contend that the difficulty facing today’s businesses is establishing an organisational culture that is both adaptable and cognizant of the wide range of cultural differences that its constituents encounter both within and across societies. Performance is connected to culture when a company adopts particular, standardised behaviours across the board. The ability of an organisation to carry out its mission by accomplishing its goals through a combination of competent management, robust governance, and a constant commitment to evaluating and obtaining results is known as organisational effectiveness. Kotter and Heskett [42] put it that corporate culture has a significant and growing influence on the performance of organisations. The study’s four main conclusions are as follows: (1) corporate culture can have a significant impact on a firm’s long-term economic performance; (2) corporate culture will likely play an even larger role in determining a firm’s success or failure in the coming 10 years; (3) corporate cultures that inhibit strong long-term financial performance are not uncommon and can easily develop, even in firms with a large and highly intelligent workforce; and (4) despite their difficult to alter, corporate cultures can be made more performance-enhancing. Based on their findings, it is evident that corporate culture has a significant impact on organisational effectiveness, both positively and negatively. Additionally, the study demonstrates that corporate culture can be leveraged to improve performance.

Kotter and Heskett [42] additionally found that although some corporate cultures are adaptable, others are not. They contend that to avoid impeding long-term financial performance—which can happen even when rational, intelligent people are present—a company’s culture needs to be flexible. Johnson [43] detailed how Family Dollar’s personable, customer-focused culture helped the company achieve $1.2 billion in sales in 1992. He maintained that a company’s financial success could be enhanced by having a strong culture. The same is true of Limited Incorporated, whose culture places a strong emphasis on relationships between the business, its staff, and its clients [44]. According to Kotter and Heskett [42], there have been multiple instances where cultural shifts have resulted in periods of improved financial performance. They made the observation that a large number of the participating companies were undergoing cultural shifts. They asserted that top-down leadership is a crucial component of effective culture change. The culture is typically controlled by the founders and leaders.

However, integrating Islamic ethics with CSR requires more than just compliance—it also calls for the creation of an ethical corporate culture. Social responsibility, honesty, and integrity are just a few of the values and principles that are part of this culture. Businesses that cultivate these kinds of cultures gain long-term advantages from moral customers, improved brand recognition, and the protection of their workers’ and communities’ welfare. Enhanced employee morale, commitment, and performance are positively correlated with a robust ethical culture, thereby augmenting overall business prosperity [45].

8. Conclusions

In conclusion, from the reviewed literature above, it can be found that Islamic ethics, rooted in the Quran and Hadith, emphasise justice, accountability, and compassion. Islamic corporate social responsibility (ICSR) principles, such as Al-Khilafa, Al-Hisaab, and Al′Amru, prioritise morality over economic viability. Similarly, Corporate Social Responsibility (CSR) promotes societal well-being, aligning with Islamic ethics. Transition economies require transformational leadership, information systems, and meaningful corporate conduct codes. Likewise, Islamic principles guide businesses in social justice, environmental stewardship, and moral behaviour, promoting transparency, honesty, and benevolence. They can also serve as a foundation for CSR initiatives. In the same vein, Islamic ethical business practices can significantly enhance corporate social responsibility (CSR) by promoting environmental sustainability and resource conservation, demonstrating trusteeship to Allah and improving CSR programmes in Muslim-majority countries. Therefore, Corporate culture significantly influences organisational performance, with adaptability and cultural awareness crucial for long-term success. Top-down leadership and integrating Islamic ethics with CSR improve performance.

Consequently, the symbiotic relationship between Islamic ethics, corporate social responsibility, and long-term success has been assessed and the analysis shows that CSR initiatives are guided by the strong moral compass provided by Islamic values and principles. In addition to improving a company’s reputation, this alignment benefits society, the environment, and all parties involved in the long run. Businesses can secure long-term, sustainable impact and short-term success by fusing Islamic ethics with CSR, making a positive and responsible impact on society as a whole. Organisations can use the concept of Islamic Corporate Social Responsibility (ICSR) as a unique ethical compass to steer them towards lasting impact. The Islamic standards of social justice, equity, and inclusivity are ingrained in the ICSR framework, which places a strong emphasis on advancing the common good and striking a balance between the interests of all parties involved. Organisations can support sustainable development by addressing social and environmental issues, encouraging moral business conduct, and developing an accountable and transparent culture through ICSR practices. Positive effects on the organisation and society at large may result from this, such as raised stakeholder trust, better reputation, and more engaged employees. However, this study suggests that future studies may look at: (1) The principles of Islamic ethics and their application in corporate social responsibility practices. (2) Case studies of companies implementing Islamic CSR initiatives and their sustainable impact. (3) Comparative analyses of Islamic CSR practices with conventional CSR approaches. (4) The influence of Islamic values on decision-making processes related to CSR activities. (5) Evaluation of the effectiveness of Islamic CSR in enhancing social and environmental sustainability.

Acknowledgments

All thanks are due to almighty Allah who gave us the chance, opportunity, and strength to put this chapter down for the benefit of all who may come across it. To those authors, we have used their literature and to Professor Abdu Ja’afaru Bambale of the Department of Business Administration and Entrepreneurship, Bayero University, Kano, Nigeria, for his mentorship and guidance, we are saying a big thank you to of you. May Allah reward you abundantly.

Conflict of interest

The authors declare no conflict of interest.