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About Accounting Research Institute (ARI)
The Accounting Research Institute (ARI), Universiti Teknologi MARA (UiTM) as the
Ministry of Higher Education Centre of Excellence (HICoE) is focusing on research in its
niche area of Islamic Financial Criminology (IFC). In essence, IFC encompasses two very
important conceptual domains: Islamic Finance & Muamalat a ~ d Financial Criminology.
Currently, ARI has eight (8) centres of excellence under its wings. These research
centres were formed with strategic alliances with professional bodies and related
agencies at various national and international levels.
The Islamic Corporate Social Responsibility (i-CSR) research project is a project under
the Islamic Finance and Muamalat domain undertaken by a group of ARI's researchers
from the UiTM - ACCA Asia-Pacific Centre for Sustainability (APCeS) jointly with
'Universiti Sains Malaysia (USM), Sebelas Maret University, Indonesia and Universitas
Muhammadiyah Surakarta, Indonesia. APCeS was set-up in collaboration with ACCA
with the objective of promoting the development and application of global sustainability
principles and to become a 'Catalytic Centre' to bring about qualitative improvem'ents in
the corporate sustainability practices within the Asia-Pacific region.
For more information about ARI, please kindly visit our website at:
http://ari.uitm.edu.myorhttp://director-ari.blogspot.com
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:1 About Islamic Banking and Finance Institute Malaysia
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(IBFIM)'
Islamic and Finance Institute Malaysia (IBFIM) is an industry-linked business
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entity Bank Nega'ra, which focuses on the development of human capital for the
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Islamic service sector. IBFIM's strengths lie in its holistic approach in providing
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solutions the Islamic Finance industry.
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IBFIM has!ltrained more than 320/0 of the industry workforce and has advantage of
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this of experience by introducing the Certification in Islamic Finance
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Qualificatilpn (CQIF), a framework that details the Islamic Finance talent development in
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Islamic Takaful, wealth management and capital market. IBFIM also provides
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advisory consultancy services in. Currently IBFIM is the preferred Shariah Adviser
for the Sh.riah based unit trust in the region.
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For more jnfo, kindly visit: www.ibfim.com
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Contents
Title
Corporate Social Responsibility
Benefits of Corporate Social
Responsibility
Islamic Corporate Social
Responsibility (i-CSR) General
Practice Framework ---
Core Elements of i-CSR framework
)
i-CSR Guidelines
Examples of CSR activities
Glossary
Description Page
Describes the concept of corporate
5
social responsibility
Describes the benefits of engaging in
5
corporate social responsibility
Describes the factors that have
6-7
the development of an
Islamic Corporate Social Responsibility
(i-CSR) framework and provides an
explanation of the i-CSR framework
Describes the three core elements of the
8-11
i-CSR framework
Provides guidance on putting i-CSR into

practice
Presents a non-exhaustive list of CSR
15-17
activities prioritised in accordance with
Shariah principles
Identifies and provides the definition of
18-21
key terms that are of fundamental
importance for understanding i-CSR
general practice framework
4
Social
Respodisibility
,:1 r
Corporate:! Social Responsibility (CSR)
gained prominence and gained an
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global focus and
1
1
attention ,if from various, sectors
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particUlar,iy the business world. Such
1I
is due to the increasIng
1I
among stakeholders which
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translate into continuous
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pressure (or businesses. CSR is defined
as Ita whereby companies
I,
integrate social and environmental 11
,I
concern id their busin,ess operations and
;ii
in
l.
interaction with their
stakeholdhs . on a voluntary basis"
1
1
(Europea* Commission 2002).
the purpose of CSR is to
encouragJ organisations to consider the
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interests;: of society by taking
j,
for the impact of the
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activities on their
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customer$, employees, shareholders,
communiBes and the environment in all
I:
aspects of their operations.
Islamic r financial institutions are
expected :'to have a heightened sense of
!
social By being an
institutiop with Islamic status, society
expects Islamic financial institutions to
be more ethical and socially responsible.
In this context Islamic financial
institutions are expected to operate with
an obJective to establish an optimal
balance between financial operations
and social objectives.
Benefits of Engaging in ,CSR
The b'enefits of engaging in CSR among
other things include:
Increase competitive advantage
Enhance reputation
Improve profitability
Strengthen stakeholder relations
Enhance employee morale and attract

Improve relationship with suppliers,
governments, peers, customers and
community
Continuous improvement
5
I
Islamic Corporate Social
Responsibility (i-CSR)
Framework
The current CSR framework which was
developed in the context of a liberal
market excludes religion as a foundation
in explaining why business corporations
should be involved in social
responsibility works in terms of
fulfilling their obligation to God. Such a
framework may not offer full guidance
for CSR practices for Islamic institutions
which is operating in a dissimilar
philosophy.
This i-CSR general practice framework
provides a holistic guidance for Islamic
institutions on their CSR strategies,
policies and practices. The i-CSR
framework offers a structured approach
to CSR practices of Islamic institutions
based on the Islamic principles and
values as enshrined within the Qur'an
and the Sunnah.
The i-CSR framework incorporates the
concept of tawhid and ibadah with the
principles of Maqasid al-Shariah and
Maslahah and the axioms of Islamic
ethical philosophy to provide guidelines
and prioritisation of CSR strategies,
policies and practices in accordance
with Shariah principles.
The objective of an Islamic CSR (i-CSR)
framework is to develop a CSR
framework based on Shariah principles
to guide the CSR strategies, policies and
practices of Islamic institutions. In order
to provide a holistic guidance for Islamic
institutions 01:t their CSR strategies,
policies and practices, the i-CSR
practices of Islamic institutions should
be integrated and forn1 part of the
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overall governance and accountability of
an Islamic institution.
Tawhid which is the principal point of
reference which guides Muslims to act
correctly in both their relations with
God and with other humans and the
universe provides the foundation for the
i-CSR general practice framework.
There are three main core elements of
the i- CSR general practice framework
namely:
(1) Tawhid and Ibadah
(2) Maqasid-Maslahah principles and
(3) Practices or Dakwah.
6
ISLAMIC CORPORATE SOCIAL RESPONSIBILITY (i-CSR) GENERAL PRACTICE
FRAMEWORK
T,.hkt

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PIIcdm

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Core Elements of i-CSR
Core Element 1: Tawhid and
Ibadah
Tawhid is the unqualified belief and
unconditional surrender to one God by
making all desires, ambitions and
actions subservient to His Commands.
This involves accepting that God is the
ultimate owner of everything on earth
and in the universe and that man is
ultimately accountable to God. In light of
God's ownership of everything, God has
entrusted mankind to the use of
resources. Thus, in return for the use of
the resources, mankind agrees to be
accountable for how the' resources is
~
used. Therefore, Mankind is created to
this world to perform two tasks:
(i) To perform ibadah needs to worship
God, seeks God's pleasure, follow
God's laws, be good to all creatures
of God and to r e ~ a i n from doing
destruction. Man's relationship with
God is to devote his life through
ibadah to Him and
(H) Man as khalifah on earth needs to
enforce the Shariah in his life,
maintains harmony and peace.
Man's relationship with humans is
to make sure that everybody lives in
peace with one another. While
man's relationship with the
environment is to make sure that
the earth that is loaned to us will
survive indefinitely.
Therefore, as a khalifah, leaders in
Islamic institutions should practice CSR
essentially from the principle of Tawhid.
The concept ibadah should govern the
development of CSR policies and
guidelines of Islamic institutions and be
integrated with the principles of
Maqasid al-Shariah and Maslahah in
order to provide guidelines and
prioritisation qf CSR activities based on
Islamic principles.
Core element 2: Maqasid al
Shariah (Objective of Syariah)
and Maslahah
Shariah which is the Islamic law of
human conduct regulates all matters of
the lives of Muslims. It is based on God's
holy word in the Qur'an, the deeds and
sayings of the Prophet Muhammad and
the consensus of Islamic religious
scholars. Shariah in all its teaching aims
at the attainment of good, welfare,
advantage, benefits, and the warding off
of evil, injury, loss, for all of God's
creatures.
The Maqasid al-Shariah which is the
objective of the Shariah is to promote
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the of all mankind. This
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involves the safeguarding of the five
protected:!: elements of Shariah which is
faith (deeh), life, intellect, posterity and
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wealth.
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The five ijrotected elements of Maqasid
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should be preserved in
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accordande with the Maslahah's levels of
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of

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COflplementary and
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Empellishments
Maslahah !i which is defined as seeking
benefit repelling harm aims to shape
the humari!: needs and as such is a tool or
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juristic used in Islamic legal theory
to the public good and prevent
social evil:;or corruption. According to Al
Ghazzali (i 998), "everything that leads to
ii
the preserVation of the five foundations is
considered:: maslahah, and everything that
i
leads to disruption of these foundations
:i
is mafsadah, and its removal is maslahah."
Therefore, in this context, the
protection of faith (deen) which is
related to faith and religion in the
category of Essentials should be given
higher priority than the protection of
faith in the Complementary and the
Embellishments levels. .In addition, the
protection of faith (deen) should be
given higher priority than the life,
intellect, posterity and wealth elements
which is related to material world
(DunyaWl).
Core Element 3: Practices and
Dakwah
The business CSR-related policies and
practices should also be guided by the
identified essential principles of Islamic
ethics; known as the Axioms of Islamic
Ethical Philosophy which comprises of
the concept of 'Unity, Equilibrium,
Freewill, Responsibility and
Benevolence.
Unity: Concept of "tawhid" which
means the totality of integrated
existence in and outside of the.
Universe.
Equilibrium or justice: Concept of
"adl" which means a sense of
balance among the various facets
of human life.
Freewill orfreedom: The ability of
human beings to act
external coercion but within the
limits set by God and as the
vicegerent of God on Earth.
Responsibility: The accountability
of human beings for all their
actions.
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Benevolence: Concept of "Ihsan"
meaning an action carried out by
a human being without the
expectation of return or reward
benefiting others.
This Islamic ethical philosophy as
proposed by Imam AI-Ghazali is
therefore significant and should govern
the development of i-CSR practices of
Islamic institutions which would then
encompass good values, forgiveness,
removal of hardship and compensation,
community service motive, and
consciousness of God.
The influence of the protected elements
based on Maqasid al-Shariah and the
levels of protection based on Maslahah
principles as well as the axioms of
Islamic ethical philosophy should then
be used to formulate business CSR
activities under the four (4) key
thematic areas of Community,
Workplace, Environment and
Marketplace. The four key areas should
be integrated into the overall strategy
and governance of Islamic financial
institutions embedding sustainability
issues into the financial institutions'
decision making process in line with
their corporate mission and values of
t upholding the Shariah principles and
within the ambit of Islamic norms.
The CSR activities that receive the
highest priority in this i-CSR framework
are those which have the faith element
in the Essentials category. In terms of
quantification and valuation, CSR
activities that fall under the category of
Essentials should be given more weight
than Complementary and Embellishments
activities while CSR activities that
receive the lowest priority are those
which have the wealth element of the
Embellishments category.. Activities that
are reprehensible and forbidden should
not be undertaken by Islamic
institutions as they are contradicting. to
the set-up of Islamic institutions. The
CSR policies and practices formulated
should then be prioritized into two main
Shariah values, namely obligatory
(wajib) and recommended (mandub).
Finally, as part of ibadah all Muslims are
encouraged. to perform Dakwah. Le.
, calling people to the religion of God and
to invite, promote, encourage and
extend good deeds to people .and to
understand the worship of God as
expressed in the Qur'an and the Sunnah
of the Prophet. Dakwah
includes both by words and actions.
Therefore, in the context of the
framework the act of participating,
practicing and disclosure of CSR
information is considered as part of
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ibadah the Dakwah
element.
This shall provide new sets
:11
of benchrhark for Islamic institutions'
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CSR This segregation of CSR
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P
ractices on the different levels of
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in order to preserve faith. life,
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intellect, posterity and wealth offers an
integration of Islamic principles and
values as enshrined within the Qur'an
and the Sunnah with the business
strategies and philosophies of Islamic
institutions. Hence, this framework
offers a structured approach for Islamic
institutions to formulate their CSR
policies to reflect their activities and be
accountable not only to societal well
being but also to God.
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;-CSR General Practice Guideline
This i-CSR general practice guideline provides guidance in integrating i-CSR throughout an
organisation. It provides guidance on putting i-CSR into practice. This includes guidance on
integrating i-CSR into the overall strategy and governance of the organisation, prioritising
the four (4). key thematic areas of CSR; Community, Workplace, Marketplace and
Environment into the protected elements of Maqasid al-Shariah and the protected levels of
Maslahah principles. A non-exhaustive list of examples of CSR activities based on the
protected elements and the levels of protection are also included in Appendix 1.
(a) Strategy and Governance
It is essential that the CSR policies and practices of Islamic institutions are formulated in
line with their corporate mission and values of upholding the Shariah principles. Therefore,
Islamic institutions should formulate their CSR policies and practices in line with their core
business activities. The more closely related the CSR policies and practices are to the c o r ~
business mission, the more closely is the fit between their CSR activities and the principles
of Shariah.
The governance of Islamic institutions is slightly different from conventional institutions.
The governance nlodel for Islamic institutions is proposed to be based on:
The Islamic principle of property rights and contracts;
The need to design the system to comply with the Islamic law; and
The protection of the rights of the stakeholders which include management,
shareholders, employees, suppliers, depositors and also the community.
To ensure that the business of Islamic institutions is in strict conformity with Shariah
principles, and to provide regulatory infrastructure that support the growth of corporate
governance mechanisms, Islamic institutions have a layer of governance which is carried
out by the Shariah Supervisory Board (SSB) in addition to having a board of directors to
govern the organisation., By having SSB, Islamic institutions ensure compliance of the core
business with the principles of Shariah which in turn will boost shareholders' confidence
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and doubts about the products and activities of Islamic institutions. The role of
SSB has to efolve to include strategic oversight on ;-CSR matters to ensure that the CSR of
;!
Islamic institutions are in line with their 'core business and upholding the principles of
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Shariah. "
I:
The dimension of ;- CSR focus attention
Key Areas: ;
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Volunteerism
Educatio1
Youth development
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homes
(c) Workplake
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The dimension of i-CSR concerns with
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Key Areas: :
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ErnploYJl1ent
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Labor/M,nagement Relations
Occupatiqnal Health and Safety
Training *nd Education
. Equal Opportunity
Equal rentluneration for women and men
(d) Environment
The environmental dimension of i-CSR concerns with
'Key Areas:
Materials
Energy
Water
Biodiversity
Emissions, Effluents, and Waste
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(e) Marketplace
The marketplace dimension of i-CSR concerns with
Key Areas:
Product and Service Labelling
Marketing Communications
Customer Privacy
Green Products and Services
Stakeholder engagement
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Appendix 1
i. Level bf Protection: Essential
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Classificatioh and Priority of CSR kctivities based on the Doctrine of Maqasid al-Shariah and the
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" Concept of Maslahah for the Level of Protection: Essential
Levels of P'totected CSR
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Protection Dimensions
if:
Essential Faith
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Pos:terity
:
Wealth
Community
Workplace
Environment
Market place
Communio/
Workplace
Environment
Marketplace
Community
Workplace
Environment
Marketplace
Community
Workplace
Environment
Marketplace
Conlmunity
Workplace
Environment
Marketplace
i-CSR Policies/Practices Priorities based on Shariah
Obligatory Recommended

Zakat awareness program
/

Training: Shariah
/
awareness program

Protect environment
/
within the community

Product and services are'
/
Shariah compliant

Programs to improve
literacy of society
/

Staff Volunteerism
/

Financing activities that
/
preserve the environment

Safe product
/

Education program for the
/
community

Enculturation of Islamic
/
values

Educate the public about
/
environmental
responsibility

Educating customers
/

Foster strong links with
/
community

Health benefit for
/
employees

Mitigate carbon emission
/

Mitigate environmental
/
impact of product

Create job opportunities
/

Pension/retirement
/
benefit for employees

Generate income from
/
environmental waste

Facilitate debt repaynlent
/
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ii. Level of Protection: Complementary
Levels of Protected CSR
;-CSR Policies/Practices
Protection Elements Dimensions
Priorities based on Shariah
Recommended
Complementary Faith Community
Workplace
Environment
Market place
Life Community
Workplace
Environment
Marketplace
Intellect Community
Workplace
Environment
Marketplace
Posterity Community ..
Workplace
Environment
Marketplace
Wealth Community
Workplace
Environment
Marketplace
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Hi. Level6f Protection: Embellishment
,:!
Levels of '(Protected
Protection ;!IElements
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CSR
Dimensions
i-CSR Policies/Practices Priorities based on Shariah
Recommended
Community
Workplace
Environment
Market,place
Community
Workplace
Environment
Marketplace
Community
Workplace.
Environment
I
Marketplace
Community
Workplace
Environment
Marketplace
Community
Workplace
Environment
Marketplace
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Glossary
1. Tawhid
2. Ibadah
3. Maslahah
4. Maqasid al
Shariah
5. Essentials
6. Complimentary
7. Embellishment
8. Faith
9. Life
The unqualified belief and unconditional surrender to one
God by making all desires, ambitions and actions
subservient to His Commands. It also means accepting that
God is the ultimate owner of everything on earth and in the
universe and that man is ultimately accountable to God.
Man's Covenant with God, which is to worship Him, seeks
His pleasure, follow His laws, be good to all creatures of His
and to refrain from doing destruction.
The preservation of the Shariah's objectives (faith, life,
intellect, posterity, and wealth) or the repulsion of harm.
T.he objective of the Shari'ah is to 'promote the well-being of
all mankind, which lies in safeguarding their faith (deen), life
(nafs), intellect ('aql), posterity (nasI), and wealth (mal).
Activities and things that are essentials to the preservation
of the five foundations of individual and social life according
to Islam.
Activities and things that are not vital to the preservation of
the five foundations, but are necessary to relieve or remove
impediments and difficulties in life.
Activities that lead to the improvement and attainment of
that which is desirable such as jewellery, innocent hobbies,
politeness in behaviour and speech. ~
Strong belief in. the doctrines of a religion, based on spiritual
conviction rather than proof. It is an ingredient for human
well-being within the Islamic perspective. Submission to
Allah's commands reflects one's submission to Allah
Himself. Allah's commands cover all aspects of a man's life
and that is why Islam is referred to as "ad-din" - a complete
way bflife.
According to Shari'ah law, life such as food and shelter is the
necessity and it is one of the top priorities that must be
preserved at all costs.
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10. Intelle9t
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11. Posterlhr
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12. Wealth!,
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13. Axioms,!\of Islamic
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"14. Unity
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15.
Equilib*ium
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16. Freewill
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17. Benevot'ence
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18.
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19.
Strategy
The faculty of reasoning and understanding objectively,
especially with regard to abstract matters.
Future generations of people; involve proper upbringing and
family integrity, moral and intellectual development, need
fulfilment, health environment and freedom from fear,
conflict and insecurity.
An abundance of valuable possessions or money and 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 intention of creating benefit
to the community.
Essential or major foundational of Islami,c ethics.
The concept of Unity of God, "Tawhid" implies total
submission to God's will and following the religious
requirements in all aspects of life.
Concept of 'adl' which means a sense of balance among the
various facets of human life in order to produce the best
social order.
The ability of human beings to act without external coercion
but within the limits set by God and as the vicegerent of God
on Earth.
Concept of "Ihsan" meaning an action carried out by a
human being without the expectation of return or reward
benefiting others.
To invite, promote, encourage and extend good deeds to
people and to understand the worship of Allah as expressed
in the Qur'an and the sunnah of the Prophet, both Muslims
and non-Muslims.
The overall scope and direction of a corporation and the way
in which its various business operations work together to
achieve particular goals.
19
20. Governance
21. Marketplace
22. Workplace
23. Environment
24. Community
Obligatory
26. Recommended
27. Permissible
28. Accountability
Refers to the system by which a company is directed and
controlled; a process by which directors and auditors
manage their responsibility toward their shareholders and
wider company stakeholders.
The Marketplace is where we find important stakeholders
our shareholders, suppliers, and customers. Companies can
interact responsibly with this group a number of ways,
such as supporting green products or engaging in only
ethical procurement practices.
The Workplace is where we draw our employees from
society and so we do with our staff needs to be
socially responsible, whether we are dealing with basic
rights or gender issues. A quality work environment
and health &'safety are obvious considerations.
An entity's movement that advocates various actions and
policies in the interest of protecting the natural
environment.
A group of people living in the same place or having a
particular characteristic in common. In Islam, business
corporations are considered as human institution which is
part of the community.
Duties that God commands us to do or rules that cannot be
forgone or compromised, since God has commanded
Duties or rules that 'are discretionary for us to do for
additional rewards and our betterment.
Duties that are permitted or allowable for us to do.
The duty of an entity to use (and preven't the misuse) of the
resources entrusted It in an effective, efficient and
economical manner within the boundaries of the moral and
legal framework of the society and to provide an account of
its actions to accountees who are not only the person(s) who
provided it with its financial resources but to groups within
society and society at large'.
20
29. Justice The quality of being fair and reasonable. It may also be
.
construed dynamically as the societal quest for equilibrium.
30. Social Actions on the partof a firm that appears to advance the

promotions on the part of some social good beyond the
immediate interests of firm and beyond legal requirement.
(CSRl!
31. Shari'aH The Islamic law of human conduct, which regulates all
'!,
matters of the lives of Muslims. It is based on the God's holy
"
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word in the Qur'an, the deeds and sayings of the Prophe't
Muhammad and the consensusof Islamic religious scholars.
21
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