Islam has very specific rules and guidelines concerning economic life. Notions of corporate social responsibility is in many ways consistent with an Islamic view of society
The value of social responsibility, either individually or collectively, has been recognised throughout history, and more structured programs for endowments and zakat were introduced by Islam in the 7th century. Major organisations throughout the world now realise that corporate social responsibility (CSR) is an important part of a company's operations, because of its positive impact on society, which in turn impacts positively on staff members and the general public.
The business community needs to be aware of the responsibility it has towards the society. CSR does not mean just taking part in charitable activities and events, it means holding the responsibility to develop the society by envisioning future plans for socio-economic justice and be conscious about their responsibility for the welfare of society around them. The business community is highly qualified to set a plan for social change, and integrate their development goals with the country's at large, as well as engage with the other organisations on collaborative projects.
CSR in the world view of Islam requires both individuals and organisations to be guided in the development of a moral self that distinguishes between right and wrong and never loses sight of its responsibilities towards God and mankind. Islam as a religion has not lost its general influence on societies where it is practiced and constitutes a ‘complete way of life' for the followers with specific implications for economic life and hence the role that responsible business can play in the development of a community/society/economy based upon the principles of social justice and equity rather than efficiency or profit generation.
- What is Corporate Social Responsibility?
- Corporate Social Responsibility at International Levels
- An Islamic perspective on the lack of social responsibility in business organisations
- Islam and Corporate Social Responsibility
- Role of Religious Scholars on Advisory Boards in Islamic banks other and Islamic financial institutions
What is Corporate Social Responsibility?
The World Bank defined corporate social responsibility to be the commitment of owners of commercial activities to contribute in sustainable development through working with their employees and their families, local community and the society as a whole to upgrade the people's living standards in a certain way that serves commerce and development in the same time. As for the international chamber of commerce, it has defined social responsibility to be all the attempts that contribute to the volunteering of co-operations to achieve development for ethical and social reasons. Hence, social responsibility depends on good initiatives of businessmen without any legal obligations. And therefore social responsibility is achieved through convincing and educating.
Corporate Social Responsibility at International Levels
Unlike the assumptions in many people's minds about the ineffectiveness of businessmen with regards to social development, corporate social responsibility became one of the vital principles of development that is being preached. The shrinking of the government's role in economic and social development caused the private sector to have an important role in the serious contribution to initiate development. At the international level and specifically in the big industrial and commercial countries, a goal has been set to achieve a balanced cooperation between the state, the businessmen and the society, in other words the government, the private sector and the third sector in achieving development without being totally dependent on one entity and lifting the responsibility off another.
Corporate social responsibility in the developed countries has overcome the description of being a random unorganized giving without specified goals; on the other hand the big corporations have had the role of being a main contributor in the development process and giving for development has become a main part of the corporations' activities. With the entrenchment and the widespread of the definition of corporate social responsibility, it became harder for these corporations to ignore their role in development and their responsibility towards the society.
The importance of such social participation does not only hold in feeling responsible but also to gain sympathy and respect of the society; consequently, the insurance of success and the demand of consumers. As a result, many corporations have built development units or at least have made yearly plans with clear goals to help the needy segment of the population and develop them in an effective way.
An Islamic perspective on the lack of social responsibility in business organisations
[Extract on paper by Zahid Parvez & Pervaiz Ahmed
Working Paper Series 2004 Number WP005/04 ISSN Number 1363-6839,
University of Wolverhampton, UK, 2004]
A weakening sense of corporate social responsibility
There is a prevalent and strong belief that private enterprise operates in an amoral vacuum (McKenna, 1996). Many of the major business ethics texts even resign themselves to the fact that there is a widespread community acceptance that the term ‘business ethics' is an oxymoron; that business and ethics do not go together (e.g. Donaldson & Werhane, 1988; Velasquez, 1992). Partly this mirrors society standards and expectations, but it is also a reflection of the nature of both economic and mainstream management theories, which have evolved to leave little space, if any, for moral and social principles. Within these theories managers owe allegiance solely to the owners, and drive businesses through the yardstick of maximum profit. The argument is simple: profitability is, after all, a necessary condition of staying in business. It is argued that this viewpoint adopts a very specific value system and world-view.
The business world is overflowing with companies that win accolades and awards (such as Business Excellence, Quality, Investors in People) yet even in these companies' words such as trust, integrity, dignity, care and virtue still fail to hold significant practical meaning. With increasing frequency, companies once held up as paragons of virtuous excellence stand mired in scandal and deceit. Like it or not, we have managed to create a world, in which expediency and short-termism are the standard norm. We are becoming dependent on societies that have to provide more and more rules and legislations because trust between business organisations themselves and between consumers and businesses is declining. Many no longer trust others to tell the truth, honour obligations or act with moral fortitude (Sonnenberg & Goldberg, 1992). There are huge costs of this trend to business because it has led to the growth of cynical employees, who behave on the belief that the impression they make is more important than the work they produce. Milton-Smith (1995) retrospectively commenting on 1980's and 90's business environment … conjure up enduring images of extravagant display and excessive greed. And more recently, in the wake of corporate collapses involving well-known companies, such as Enron and WorldCom, many questions have been raised about the integrity of business and government leaders. There have been disturbing revelations of unethical and, in some cases, illegal business practices.
The link between a world view and problem solving approaches
There could be numerous reasons for such behaviour on the part of business organisations. One possible reason that is argued … is the use of problem-solving approaches and frameworks that emerge from secular-economic paradigms. These approaches, rooted on a materialistic worldview, tend to exclude spiritual and moral dimensions in the process of framing business and social problems. This in turn, influences business decisions and practices related to all aspects of the business including attitudes towards social responsibility and ethical codes in general.
There is a strong link between a worldview and problem-solving paradigms, and subsequently, between problem-solving paradigms and the degree of compliance to ethical codes and social responsibility exercised by a business organisation. The economic problem-solving approaches, due to their inherent reductionist methodologies and shortterm vision, tend to view compliance to ethical codes and fulfilling of corporate social responsibility as an extra cost, extra work and a distraction from the core business functions. In view of this, such approaches tend to either ignore or not include corporate social responsibility amongst the priorities of a business organisation.
A particular worldview, or the way people perceive social and material reality, impacts on how they interpret and respond to the world around them. A worldview embodies beliefs and assumptions about reality and it guides personal, corporate and social life in a particular direction. Peoples' goals, aspiration, priorities, strategies, commitments, and likes and dislikes, are all, on the whole, influenced and forged by the worldview they hold. The way people perceive the world shapes their social and political beliefs, and, thus, a worldview underpins social and economic policies and the culture of a community and business organisations. Islam contends, that a worldview that does not embody reality in its fullness, or is based on partial accounts of our true nature, will inevitably cause imbalances and inconsistencies in our personal, business and social life, leading to numerous social problems, strains and injustices in business and society. Such a worldview would lead to flawed perspectives and incoherent and disassociated social values, and, thus, affect attitudes and social conduct in a negative way. “Thus, any efforts for improving social life must begin by analysing the dominant worldviews in society, and the arising social principles and problem solving frameworks that guide and influence social policy” (Parvez, 2000 p.76).
Developing these arguments further, it is inferred that a worldview provides a particular vision of life and the universe around us. This vision, in turn, develops a specific frame of mind (a mindset), and it is this that gradually nurtures certain attitudes and creates distinctive approaches to life and human problems. Those who hold materialistic-secular views will tend to approach social and business problems and issues from different premises and perspectives as compared to those holding the Islamic worldview, or other worldviews for that matter. In light of this, it is argued that both the scale (i.e. dimensions considered) and scope (i.e. degree of broadness of strategies employed) regarding business ethics in general and corporate social responsibility in particular, would differ between different worldviews. In other words, different worldviews, and the emerging problem-solving frames of mind, would not view business ethics and social responsibility in the same way. There will be different opinions regarding what the aims of social responsibility should be or the appropriate responses for it. Thus, different worldviews would lead to problems being framed in different ways and would also influence and guide the process of formulating responses and solutions in different ways.
In light of this, there have been efforts to introduce changes in the worldview held by business organisations and society in general, in order to influence change in business models and to broaden problem-solving approaches. For example, there has been a pregnant yet significant shift in worldview over the last few decades. In the West, it began in the late 1970s, with the birth of environmentalism (Weiner, 1992). In the East, the notion of harmony with nature has long historical antecedents in religion as well as custom and practice. Many of the World's religions, such as Islam, Christianity and Buddism, explicitly embody principles of stewardship. This change holds significant meaning and could possibly transform many of the business models. The effects of these influences are gradually beginning to reverberate into a re-interpretation of the business gestalt. The mantle of the economic mantra of profit and dominion over nature is being challenged by the notion that humankind has stewardship obligations and social responsibilities beyond the self. Material dominion as mode of thought placed humankind at the top of a hierarchy and entitled it to exploit all of nature and even other humans for its own ends. Stewardship, in contrast, suggests that the task of humanity is to take care of its environment and preserve nature in all its forms and relationships. If humankind is to achieve the goal to return in as good or better shape the world that they inherited to each succeeding generation then nurturance and care need to become the primary drivers rather than profit alone.
Indifferent to ethical codes: a consequence of materialistic problem solving approaches
To understand the different responses and solutions derived from different worldviews, a closer examination of the problem-solving approaches and frameworks is required. As an illustration, the Islamic worldview recognises both the spiritual and material dimensions of reality and hence incorporates these into its philosophy of life and problem-solving approaches.
Behold! your Lord said to the angels: 'I am about to create humans, from sounding clay; from mud moulded into shape. When I have fashioned him (in due proportion) and breathed into him of my spirit, fall ye down in obeisance unto him
(Quran, 15:28-29).
In contrast, materialism as a worldview argues that only the material or the physical universe constitutes reality. Matter and energy are the ultimate reality and, hence, the spiritual realm of our being and that of the universe is rejected. Materialism has been defined as: a primary concern for the acquisition of material goods and the enjoyment of physical satisfactions, and as a consequent rejection of or indifference to the spiritual, aesthetic, or ethical…(Stuart, 1989 p.19).
A frame of mind emerging from such a worldview naturally acknowledges only those dimensions of the social reality that are observable and have material form, whilst other dimensions that do not have any external and observable features are mostly overlooked or even ignored entirely from analysis (e.g. moral and spiritual dimensions). Hence, this partial view of social reality gradually places mental constraints on how problems are defined and subsequently on the solutions that are formulated. It prevents business decision-makers from developing more creative and broader mental and intellectual tools required for analysing and understanding stakeholder problems in a comprehensive and balanced ways. In other words, such a mindset places limitations on the problem-solving methodologies that are meant to guide policy-makers in framing stakeholder problems and developing solutions. This is why the boundaries that are drawn around a problem situation are often judgmental, narrow and exclude numerous non-material dimensions of the social phenomenon being addressed (Vickers, 1965). For example, the causes of business problems generally identified through secular-economic approaches tend to be restricted to material factors such as resources, profits, growth and efficiency. Such conclusions, however, reduce the variety of solutions that are possible for a given problem. Thus, due to the restricted nature of secular approaches, other, possibly more effective solutions which draw on the inner resources (i.e. moral and spiritual dimensions) to solve social and business problems, and which can inspire positive attitudes in people, generally remain outside business decision making.
Some of the popular secular-economic problem-solving approaches are broadly framed within a positivist approach such as the social survey tradition, and less often in the sociology of social problems, symbolic interactionism, and the natural history approach to social problems, amongst numerous others (Parsons, 1995). Most of these problem-solving approaches start by separating out and isolating the particular issue of concern (e.g. drop in profits) from its wider human and social context. They then employ various data collection methods for gaining insights into the problem situation. However, these methods tend to primarily focus attention on the hard properties of the problem context (i.e. objective and quantative data such as sales, outputs, bottom-line metrics, observable behaviour, etc.) and underplay the spiritual and soft properties (such as feelings, attitudes, tastes, perceptions, values, personal relationships or other subjective data). This is so because hard properties are easy to identify and generalise as opposed to the soft properties. Thus, the data collected often fails to illuminate the spiritual and moral dimensions of the problem situation, since these properties fall outside the problem-search boundaries. In other words, most secular-economic problem-solving approaches tend to employ a reductionist approach in identifying and addressing complex organisational problems, and these often ignore or overlook the intermeshed moral and spiritual issues. Problems are narrowed down and addressed in isolation to other wider moral and social issues, which may be important factors in their cause.
Moreover, on the output side, that is, in the formulation of solutions, secular-economic approaches tend to also rely largely on material/technological resources to bear upon the problem and for implementing the solutions. Thus, solutions from such approaches generally require material and economic resources, and external agencies and control mechanisms for their implementation, rather than the inner human resources and control mechanisms (i.e. positive emotions such as compassion, mercy, spirit of forgiveness, self and social discipline, motivation, self-adjustment and self-control).
As a result, such solutions place an increasing reliance on extrinsic mechanisms (e.g. monitoring, surveillance, performance measures, etc.) to ensure compliance to ethical codes and for implementing solutions in general. However, in the long term, such solutions, which emerge from secular problem-solving methodologies, mostly create a cyclical problem situation - they make people more dependent on external monitoring mechanisms or satisfier agencies (i.e. the money and external rewards), and by so doing further cultivate individualism, which narrows the spheres of personal and corporate social responsibility, which more often than not gives rise to win-lose solutions rather than collaboration based win-win solutions.
Some examples at this stage will help to illustrate the basic differences that exist between the Islamic and materialistic-secular problem-solving approaches. For instance, issues such as employee theft, misuse of proprietary information, abuse of company expense accounts, misuse of company assets and so on can affect the performance and subsequently the profits of a business organisation. These can also damage the standing of a company in society if they become widespread. So how can such offences or misdeeds be checked or eliminated completely? A secular approach would perhaps deal with each category of offences in isolation to the bigger picture of such problems. The process followed would include the collection of data on the offences or misdeeds in order to understand its material causes (in isolation from the wider moral conditions and social context), developing a number of alternative technical and formal/legal responses/solutions to address it, and then selecting the most appropriate one within budgetary constraints. Take the misuse of proprietary information for example. To address this issue, a materialistic-secular approach would aim to understand who has been involved and the strategies that have employed in committing such an offence, and as a result suggest the installation of more secure software systems for authentication and authorisation, secure locks, alarm systems in offices where the information maybe held, or even the imposition of harsher disciplinary policies for offenders, and so on. However, it is generally true that, with every problem solving strategy an organisation can come up with, offenders have managed to find some other ways for committing these sorts of offences. Thus, despite the fact that there are tougher disciplinary policies, penalties and more surveillance, such offences and misdeeds are not reduced. According to Islam, the solution does not lie solely in more secure software systems or other technological and legal policies, rather the inner dimensions of our being also requires attention; the deep recesses of the heart and soul have to be affected with moral-values, sense of accountability and respect for other peoples' property in order to change people's behaviour and attitudes towards such offences and social evils in general.
Similarly, to address a drop in profits, a secular approach would aim to understand how profits fell in terms of sales, output, manpower efficiency, and so on. However, it is found that, with many symptoms based responses/solutions (such as piece rate wage systems, gain-sharing, promotions, marketing manoeuvres and ploys etc) short term solutions emerge to the detriment of the long term.
Thus, despite the temporary improvement long term amelioration is not forthcoming. According to Islam, the solution lies not only in the extrinsic and surface but often the solution demands attention to the spiritual and moral dimensions of our being. This underpins personal citizenship, as well as organisational citizenship behaviours. Additionally materialistic-secular responses to problems try to contain or reduce their effects rather than addressing their roots. Such solutions to problems tend to operate by setting up of monitor and control structures, which are then operated indirectly through processes of control mechanisms such as ISO standards. Several millions of pounds are spent annually to form and maintain such control standards, but often with little results. As anticipated, such approaches mostly fail to lead business towards long-term stakeholder harmony, and at best only succeed in creating some awareness and understanding of such problems.
In contrast, Islam draws our attention to the fact that human motivation stems from one's worldview (Quran: 49:13). Improvement cannot, therefore, be made through control and legislation alone.
Certainly legislation and control mechanisms play an important role in establishing appropriate behaviour and minimum levels of performance but they constitute a small part of bigger issue of human behaviour and performance. From an Islamic perspective, control and laws that are to be employed for guiding personal and business conduct should be enacted to protect minimums of standards or as deterrents to wrong-doing. More than this there is a need to cultivate a higher consciousness, morals, and a sense of accountability as a prerequisite since they develop an inner respect for societal values and laws. Taken together, these can ensure a change from within and without. “Abhorrence of wrong-doing comes from within and, thus, the seed of change must be sown from within. Therefore, relying only on laws to change people may not lead to an effective overall and lasting change in business and society” (Parvez, 2000 pp.135-136).
Thus, from an Islamic perspective, such secular-economic problem-solving approaches do not deal with business and social issues and problems in a balanced and comprehensive way. Solutions that emerge are based either on partial understanding of the problem's spiritual, moral, psychological, sociological, political and economic dimensions, the wider problem context and their interrelationships, or are perhaps politically and economically motivated (Parsons, 1995 pp. 215-216), and thus, lack far-sightedness. On the whole, such approaches in business organisations overlook the more fundamental issues and concerns of employees and customers. The need for recognition, dignity, mutual support, justice, and for satisfying other emotional and spiritual requirements, which are essential for a healthy and balanced personal and work life, are not given the attention they deserve. Perhaps, this is why stress, depression, anxiety, boredom, deterioration in working relationships and spiritual emptiness are becoming a symptomatic condition of the modern business environment. From an Islamic perspective, at the very best secular problem-solving approaches address the symptoms of business problems, especially those involving business ethics and corporate social responsibility, rather than their root causes. Due to their narrow focus, and faulty premises, they fail to fully reconnect employees to the collective organisational life in which they exist.
The weakening sense of social responsibility
With the above foundations, this section moves onto explore the reasons why a sense of corporate social responsibility is weakening, as perceived from an Islamic perspective. From a materialistic secular view, exercising social responsibility is likely to be seen as a cost, and cost implies a reduction in profits, and this in turn can be considered to be against the interest of the business. From this perspective, it can be understood why business organisations limit their time and other resources for meeting their social responsibilities, or even try to absolve themselves from this extra work if they can. It follows, that in order to make organisations comply in fulfilling their social responsibilities some kind of policy or legislation would be required. However, this reduces social responsibility to a legal obligation and, which over time, weakens the importance of it being viewed as a moral or social obligation. Also, the drawback of this is that the law, although it may act as a deterrent, it cannot reach all spheres of business responsibility, and hence can be undermined or even broken. Thus, to ensure that business organisations fulfil their social responsibilities, external mechanisms of control are relied upon.
In contrast, from an Islamic perspective, social responsibility exercised by a business organisation is seen as a benefit rather than a cost. The logic of this can only be understood when the issue is considered in broader scale and a longer time frame. Islam takes an integrated view of individuals and society. It also broadens the frame of problem definition in terms of scale, scope and time horizon. From an Islamic perspective, therefore, social responsibility is not just a matter of legal obligations and material rights of stakeholders. It is a moral obligation and is a matter of survival of both business organisations and society, as they are both dependent on each other. Any social irresponsibility exercised towards each other would create problems for both, although these may unfold over a longer time span. Thus, if a business organisation does not fulfil its social obligations, and as a result passes on its costs (e.g. in the form of improper/illegal waste disposal, exploitation through false advertisement, direct exploitation of employees or customers, or by not addressing poor working conditions, high levels of stress, etc. onto society, it will come back to haunt or damage the business through different ways and forms such as sabotage by employees, poor morale, or even higher taxes, inflation, reduction in sales and profits, etc.). For example, a high level of stress amongst employees will mean more time off work or more people needing healthcare and medication.
This will in turn increase pressure on healthcare institutions and subsequently they will demand more resources from the government. To respond to these needs, the government may need to increase individual and corporate taxes or raise money in other ways. Ultimately, whatever the response strategy is adopted, it is likely that business organisations will have to meet these increased costs either directly or indirectly in the longer term (e.g. a company can also be sued by employees for negligence).
In contrast, by being more socially responsible and actively striving to balance the rights of all stakeholders based on fairness, justice and dignity, and ensuring a just distribution of wealth, will actually benefit a business organisation in the long-term as these would raise satisfaction, create a healthy and conducive working atmosphere, reduce stress, improve morale, increase productivity, and also increase the circulation of wealth in society.
For those who give in charity, men and women, and a loan to God a beautiful loan, it shall be increased manifold (to their credit) and they shall have, (besides) a liberal reward
(Al-Qur'an, 57:18).
God deprives usury of all blessing, but will give increase for deeds of charity
(Quran 2: 276).
By spending in charity, the wealth does not decrease… (Muslim, vol. 4, no: 6264). In other words, costs (in different forms) that are pushed onto society will come back as greater costs for business organisations. In contrast, any benefits that are pushed onto society will come back as greater benefits for business organisations over time.
In contrast to the narrow secular approaches, Islam adopts a broader boundary of reference in terms of issues considered as well as the time frame. Religions, like Islam are guided by moral and social frameworks that assist in focusing attention on addressing the root causes of social problems.
They take into consideration the wider factors impinging on a problem situation. The inner dimensions of our being, our human nature, aspirations and inclinations, positive and negative emotions, and the need for family, friendship, community, dignity and social contact, together with the dominant cultural values, social attitudes and practices, economic conditions, and time-space factors, etc., are all factors that need to be taken into consideration when addressing socially embedded business problems. However, many of these hardly come into the frameworks of materialistic-secular problem-solving methodologies. In Islam, the Holy Quran prescribes the process of Shura (i.e. consultation) for problem solving. In fact, Islam enjoins consultation (Shura) at all levels of individual, business and social life: in the affairs of the family, business, community, society and the state.
Those who hearken to their Lord, and establish prayer; and who (conduct) their affairs by mutual consultation; who spend out of what We bestow on them ...
(al-Shura 42: 38).
Hasan (1984) has defined Shura as: ‘a collective endeavour for seeking an objective truth'. In it, the participants are involved in a free exchange of ideas and views to arrive at a decision or a solution to a problem, basing them on the guiding frameworks contained in the Quran. The discussion is not based on blind support of a person, group or party, or constrained to narrow economic factors, but is rather intended to bring benefit and justice to all stakeholders in a problem situation.
Shura as a concept is rooted on pluralism, active participation of all stakeholders in a problem situation, and the employment of broader frameworks that are more inclusive of both material and spiritual factors. It is a process of deliberation involving all stakeholders in identifying the problem situation and in formulating the solutions. The process aims to arrive at responses or solutions to social problems that draw on the powerful inner human resources such as spiritual values for improving social attitudes and inspiring people to work for the common good.
In light of Islamic guidance, the issue of compliance to an ethical code and a weakening sense of corporate social responsibility need to be viewed in a broader context, and a more holistic approach needs to be formulated. Islam suggests that corporate social responsibility should not be viewed in a narrow sense - solely in meeting legal obligations. Rather, in addition, consideration should be given to meeting spiritual and moral obligations by drawing on the inner resources and the deeper positive emotions (e.g. mercy and compassion) that nurture a sense of duty towards others and a caring attitude. The deep underlying human feelings and needs for such things as dignity, the need for mutual support, respect, socialising and communicating, sharing with others, and so on, cannot and should not be overlooked. Human beings, and by extension businesses, cannot live by bread alone (that is, material things). Businesses are as much spiritual entities as they are material entities.
Organisational spirit is embodied by the collective business values, traditions and acts of individual employees. Besides economic needs, social and spiritual needs also need to be taken into consideration when addressing business social responsibility, or any other responsibility for that matter. The Islamic solution advocates creating a culture that constantly nurtures and draws upon these inner resources and positive forces to change attitudes and social practices (with the support of material resources). These are drawn upon to bind employees into the business, much as we bind individuals into a family and community, so that a natural infrastructure for providing support and help to those in need is nurtured and established. For example, the Islamic solution places the bulk of the responsibility of ‘social welfare' on the family and community, and the State is expected to intervene only when these natural social structures are unable to cope. In the broader context the business organisation is an integral extension of the family and community. Additionally, under this perspective the legislative or control approach is perceived as the bare minimum platform from which higher organisational citizenship and civic behaviours emerge, if nurtured correctly.
Materialistic-secular approaches generally provide technological and economic solutions to ethical and social issues, and tend not to draw upon the inner human resources to change and improve social attitudes. Also such solutions rely on external means, such as on-going monitoring processes, control agencies or the creation of control structures and processes for their implementation, and thus, require huge resources. This adds to the overall costs of the business and hence could lead to a reduction in profits. Drawing support from the resources that exist in the natural business environment (e.g. the employees) from where the problems originate, is not usually actively sought. Such approaches therefore create a demand for more and larger control agencies, and thus, gradually increase the role of the control structure and hierarchy. Over time these problems become bigger and increasingly more difficult to address. Numerous scholars highlight drawbacks of increased and more rigid structures for governance, albeit for different reasons (Hayek, 1976; George & Wilding, 1985).
Control, in contrast to empowerment, creates a business dependency on the function of a hierarchy of command and control, and this gradually undermines employee capacity and willingness to take responsibility for themselves (Thomas & Velthouse, 1990; Spreitzer, 1995). In turn, this subtle shift nurtures a weakening sense of wider social responsibility. Control environments characterised with amoral conventions come to rely and look after only self-interest (Fukayama, 1995; Mayer et al.1995). Thus, many employees no longer feel a personal responsibility for ensuring compliance to an ethical code as this is taken over by extrinsic and impersonal mechanisms. Purely, economics based decision-making, thus, contributes to attitudes of indifference to ethical codes and corporate social responsibility. This attitude gradually fragments the organisational community/collective and breeds individualism. In other words, it roots processes for social atomisation and an attitude of social neglect, indifference and even social irresponsibility (Etzioni, 1988; 1993).
In short, decision policies that have emerged from economic problem-solving approaches have in many cases created attitudes of indifference towards ethical codes and corporate social responsibility. They have contributed in breeding individualism, weakening of social relationships, and a culture where people lack a responsible, caring and sharing attitude (Tajfel, 1982; Deutsch, 1949; 1985). An Islamic perspective, which views the material and spiritual dimensions of social reality inclusively, argues for more comprehensive and balanced problem-solving approaches for resolution of stakeholder issues. To achieve this, it is suggested that economic problem-solving approaches should be broadened in scale (i.e. increase the range of dimensions analysed) and in scope (i.e. be part of a wider strategy for reforming and improving social life). They need to give consideration not only to the material and economic dimensions of the problem situation, but also to the following:
a. The spiritual dimensions of human nature; that is the positive and negative motives, desires, emotions and feelings, likes and dislikes, social attitudes and inter-personal relationships. Many problems arise from the inner spiritual state, moral condition of employees and the broader work culture. Positive or negative actions are driven by powerful inner forces such as: compassion and mercy, anger and hate, selfishness and indifference, jealousy and greed, sense of duty and respect, level of stress, system of rewards, a desire to meet ones' basic needs and aspirations, and the need for justice, freedom, the sense of dignity, affection, belonging, community, etc. An understanding of the spiritual and moral state of affairs is therefore important in social problem analysis and in the formulation of effective responses/solutions. Part of the business solution should also include strategies for inspiring and uplifting people spiritually, nurturing positive motives, desires and feelings, developing stronger inter-personal and social relationships, and a more friendly and conducive work culture (Edwards, 2000; Voydanoff, 1989; Zedeck, 1992).
The five pillars of Islam help to bring people at all levels of society together, in interaction and mutual support. They actually provide a focus on obligations and duties as well as rights and relationships of each other (by removing social hierarchies and barriers) and encourage the development of individuals and the community: spiritually, morally and socially.
b. Business problem analyses needs to integrate economic consideration with deeper social analysis. That is problems in one area of business may have their roots or triggers in other areas. For example, pollution, poor performance or a weakening sense of social responsibility may be triggered or caused by poor education, work pressures, family problems, peer group pressures, negative social attitudes etc. Therefore, analyses of different problems need to be integrated and a bigger picture developed of the state of social milieu of the organisation. This provides a more comprehensive and integrated approach to develop effective strategies to adequately address business social responsibility issues. According to Islam, this can be realised through the process of Shura (i.e. the involvement of all stakeholders in a free discussion in identifying the problem situation and in formulating the solutions)
c. Solutions should be guided by values and principles of social and economic justice, fair treatment, individual and social responsibility and accountability, etc. These should help to establish a balance between rights and duties.
d. Solutions should aim to strengthen the natural social infrastructure and not lead people to become dependent solely on the extrinsic rewards or monitoring mechanisms. They should provide support to, and not undermine the resources that exist within the natural social contexts from which the problems arise. In other words, the responsibility for developing and implementing solutions should be placed within the context from where the problems originated. Solutions should not be imposed from the top or from outside the social context, rather the business needs to work with the employees and customers and not upon them.
Islam and Corporate Social Responsibility
Notions of corporate social responsibility (CSR) have been suggested to be consistent with an Islamic view of society. Indeed, values and principles that have been central to Islam since the time of the holy Prophet Mohammed (Peace and Blessings be upon him) may serve as a foundation for notions of corporate social responsibility (CSR) similar to those in the West. Much contemporary discussion of CSR, however, has not recognized this. These discussions have largely been based on a Western orientation informed by Western religious values. Moreover, CSR has evolved literally in response to particular issues or problems that are specific to businesses in a Western context. This led to a lack of a comprehensive global context within which a wider perspective of CSR should be positioned. On the other hand, the notion of social responsibility and justice has been an integral part of Islamic society for nearly 14 centuries. While Islamic philosophy is rich in precepts pertinent to CSR based on the Shari’ah (the Islamic legal and social system) derived from the Holy Qur'an and Hadith, these precepts have not yet been formally synthesized to present a systematic model with an explicit notion of CSR in Islam.
[Mohammed, Jawed A, Abstract PhD thesis on Corporate social responsibility in Islam, 2007 AUT University]
A weak compliance to ethical codes and a weakening of the sense of corporate social responsibility may exist due to numerous social, economic and cultural pressures. These pressures are linked and have emerged from the dominant and deeply rooted materialistic secular worldview in society. The problem-solving approaches have emerged from a materialistic mindset, which perceives social reality in material forms only. The non-material inner resources and spiritual dimensions that form part of the human and social reality are either rejected or largely overlooked and ignored. In light of this, the economic problem-solving approaches in general are unable to guide decision-makers in digging deep to identify the roots of ethical and social problems and issues, and therefore, the solutions tend to be restricted, limited, and lack balance. By linking the individual to the organisational community, companies can go a long way in avoiding the common shortcoming of business practice in business, as most arise from heavy reliance on technical rules based conformance to create technical proficiency (Mautz & Sharaf, 1996). Also, such approaches often obscure the role of individual to the extent that important moral and ethical issues are overlooked (Shaub et al., 1993). This type of blinkered focus is typified by the recent wave of companies adopting corporate codes of ethics and standards, in which managers hide behind a code of ethics believing they are ethical if they do not violate the rules. Such approaches often do away the role of ideals, virtue and individual integrity in the process. Sonnenberg and Goldberg (1992, p.54) note that many organizations believe there is no correlation between integrity and bottom-line performance but they are wrong: “integrity and performance are not at the opposite ends of a continuum... When people work for an organization that they believe is fair, where everyone is willing to give of themselves to get the job done, where traditions of loyalty and caring are hallmarks, people work to a higher level.”
[Extract on paper by Zahid Parvez & Pervaiz Ahmed, Working Paper Series 2004 Number WP005/04 ISSN Number 1363-6839, University of Wolverhampton, UK, 2004]
Islam and The Environment
[Fazlun M Khalid, Islamic Foundation for Ecology and Environmental
Sciences, Birmingham, UK]
The roots of Islamic environmental practice are to be found in the Qur'an and the guidance (sunnah) of the Prophet Muhammad. Over the centuries, Islamic practice has been elaborated by a succession of scholars and jurists responding to real problems experienced by the growing community of Muslims in various parts of the world.
The Islamic worldview is based on the belief in the existence of an all powerful creator who is the same God (Allah in Arabic) of the other monotheistic faiths, Judaism and Christianity. Muslims learn from the Qur'an that God created the universe and every single atom and molecule it contains and that the laws of creation include the elements of order, balance and proportion: “He created everything and determined it most exactly” (25:2) and “It is He Who appointed the sun to give radiance and the moon to give light, assigning it in phases . . . Allah did not create these things except with truth. We make the signs clear for people who know” (10:5).
What may be described as the Islamic creed has three aspects. The first is the core value system that Islam establishes, which is Islam itself and in this context is taken to mean submission. The second is faith (iman) and the third is good personal conduct (ihsan) traditionally described as righteousness or piety.
“it is He who produces gardens, both cultivated and wild, and palm trees and crops of diverse kinds and olives and pomegranates both similar and dissimilar. Eat of their fruits when they bear fruit and pay their dues on the day of their harvest, and do not be profligate. He does not love the profligate.”
Qur'an again uses an environmental theme in exhorting humankind to be moderate; (6:142):
The Qur'anic view holds that everything on the earth was created for humankind. It was God's gift (ni'mah) to us, but a gift with conditions nevertheless and it is decidedly not something that one runs and plays with. The earth then is a testing ground of the human species. The tests are a measure of our acts of worship (ihsan) in its broadest sense.
For Muslims, their din is a whole, an organic reality, where every element has a function as a part of this whole. For example, Islam law does not make sense without the ethical dimension of the divine revelation. Law in the West is amoral. It deals with human ends for human purposes. The Muslim idea of the highest form of civilization is that it is the one that is pleasing to Allah.
People would find it impossible to live in today's world without money, but one increasingly comes across interesting appraisals of it like the following for example: “. . . in spite of all its fervid activity, money remains a naked symbol with no intrinsic value of its own and no direct linkage to anything specific” (Kurtzman, 1993). Money has come to be recognized as mere tokens and: there is something quite magical about the way money is created. No other commodity works quite the same way. The money supply grows through use; it expands through debt. The more we lend, the more we have. The more debt there is, the more there is. (Kurtzman, 1993)
These tokens of value that we create from nothing and use everyday grow exponentially ad infinitum. But we know that the natural world, which is subject to drastic resource depletion, has limits and is finite. This equation is lopsided and the question is for how long can we continue to create this infinite amount of token finance to exploit the real and tangible resources of a finite world. Looked at from this perspective, money, as the modern world has contrived it, assumes the characteristics of a virus that eats into the fabric of the planet. The consequences of this become visible as global environmental degradation.
However, people are increasingly taking a serious look at the current model of endless growth that supplies a contrived demand for consumer goods, which appears to be insatiable and which is, in the end, impacting on the biosphere with drastic consequences. This concern is reflected in the West by the growth of activism and protest organizations.
The planetary system, the earth and its ecosystems, all work within their own limits and tolerances. Islamic teaching likewise sets limits to human behavior as a control against excess and it could be said that the limits to the human condition are set within four principles. They are the unity principle (Tawhid); the creation principle (Fitra); the balance principle (Mizan); and the responsibility principle (Khalifa).
The Unity Principle
Tawhid is the foundation of Islamic monotheism and its essence is contained in the declaration (Shahada) which every Muslim makes (in the first part) and is a constant reminder of faith. It is “there is no God but God” and is the foundational statement of the Unity of the Creator from which everything else flows. “what is in the heavens and the earth belong to Allah. Allah encompasses everything” (4:125). This is the bedrock of the holistic approach in Islam as this affirms the interconnectedness of the natural order.
The Creation Principle
The Fitra principle describes the primordial nature of creation: “Allah's natural pattern on which He made mankind” (30:29). Mankind was created within the natural pattern of nature and being of it, its role is defined by this patterning itself. Fitra is the pure state, a state of intrinsic goodness and points to the possibility that everything in creation has a potential for goodness and the conscious expression of this rests with humankind.
The Balance Principle
In one of its more popular passages, the Qur'an describes creation thus (55:1–5): “The All-Merciful taught the Qur'an, He created man and taught him clear expression. The sun and moon both run with precision. The stars and the trees all bow down in prostration. He erected heaven and established the balance. Allah has singled out humankind and taught it clear expression – the capacity to reason. All creation has an order and a purpose and is in a state of dynamic balance.”
The Responsibility Principle
This principle establishes the tripartite relationship between the Creator, humankind and creation. God created everything for humankind and appointed it the vice-regent (Khalif) on this earth: “it is He Who appointed you Khalifs on this earth” (6:167). This role was one of trusteeship (amanah) which imposed a moral responsibility, “We offered the Trust to the heavens, the earth and the mountains but they refused to take it on and shrank from it. But man took it on.” (33:72). This assumption of responsibility made humankind accountable for their actions, “Will the reward for doing good be anything but good?” (55:59).
Role of Religious Scholars on Advisory Boards in Islamic banks other and Islamic financial institutions
Islamic financial institutions must adhere to the best practices of corporate governance however they have one extra layer of supervision in the form of religious boards. The religious boards have both supervisory and consultative functions. Since the Shari’ah scholars on the religious boards carry great responsibility, it is important that only high calibre scholars are appointed to the religious boards.
An Islamic financial institution is required to establish operating procedures to ensure that no form of investment or business activity is undertaken that has not been approved in advance by the religious board. The management is also required to periodically report and certify to the religious board that the actual investments and business activities undertaken by the institution conform to forms previously approved by the religious board.
Islamic financial institutions that offer products and services conforming to Islamic principles must, therefore, be governed by a religious board that act as an independent Shari’ah Supervisory Board comprising of at least three Shari’ah scholars with specialised knowledge of the Islamic laws for transacting, fiqh al mu`amalat, in addition to knowledge of modern business, finance and economics.
They are responsible primarily to give approval that banking and other financial products and services offered comply with the Shari’ah and subsequent verification that of the operations and activities of the financial institutions have complied with the Shari’ah principles (a form of post Shari’ah audit). The Shari’ah Supervisory Board is required to issue independently a certificate of Shari’ah compliance.
The day-to-day application of Shari’ah by the Shari’ah Supervisory Boards is two-fold. First, in the increasingly complex and sophisticated world of modern finance they endeavours to answer the question on whether or not proposals for new transactions or products conform to the Shari’ah. Second, they act to a large extent in an investigatory role in reviewing the operations of the financial institution to ensure that they comply with the Shari’ah.
The concept of collective decision-making, in other words, decisions made by more than one scholar, is especially important. Shari’ah Supervisory Boards function is to ensure that decisions are not unilateral, and that difficult issues of finance receive adequate consideration by a number of qualified people.
Shaikh Yusuf Talal DeLorenzo, Islamic scholar, position is that unless a financial product or service can be certified as Shari’ah compliant by a competent Shari’ah supervisory board, that product's authenticity is dubious. At that point, it will be the responsibility of the individual investor or consumer to determine on his or her own that the product complies with the principles and precepts of the Shari’ah.