Islamic Corporate Social Responsibility Disclosure Index: The Application of Maqasid Shari’ah and Maslahah

No. 2022, Pg. 1058 Abstract The paper attempts to develop the Islamic Corporate Social Responsibility ( i -CSR) Disclosure index for Shari’ah Compliant Companies ( Sh CC) in Malaysia. The i -CSR disclosure index was constructed based on the four themes of CSR framework that was established by Bursa Malaysia in 2006, namely, marketplace, workplace, environment and community. In addition to existing CSR framework, this study incorporated the five values of Maqasid Shari’ah namely protection of faith ( al-din ), protection of human life ( al-nafs ), protection of intellect ( al-aql ), protection of posterity ( al-nasl ) and protection of wealth ( al-mal ).and Maslahah namely essential ( daruriyyat ), complementary ( hajiyyat ) and embellishment ( tahsiniyyat). The items of the four themes were developed based on the previous study, annual report of Middle East countries, annual report of the Prime Minister’s CSR Award and National Annual Corporate Report Awards (NACRA). All of the mandatory items required by the approved Accounting Standards, Companies Act, 1965 and Bursa Malaysia Listing Requirement were eliminated in the i- CSR index. A checklist of ninety-three (93) items was used in this study after taking into consideration the ten (10) expert opinions, which were from the regulatory board Shari’ah officer from the Islamic Banking and Finance Institute Malaysia (IBFIM), Shari’ah officer from Jabatan Mufti and Majlis Agama Islam, and academicians from accounting and Islamic studies.


Introduction
beings that are inextricably linked to Islamic belief, values, and objectives (Iqbal & Mirakhor, 2004). As a result, it demonstrates that CSR is a requirement under Shari'ah in achieving benefits and preventing harm to humanity.
A number of verses in the Quran contain provisions aimed at achieving certain objectives (Maqasid) intended by Allah (SWT) as the lawgiver. It demonstrates that Allah (SWT) does not act in vain, as demonstrated by his questioning of their creation. As stated in the Quran: "For [thus it is:] we have not created the heavens and the earth and all that is between them in mere idle play. None of this have we created without [an inner] truth: but most of them do not understand it" .
Therefore, any types of Allah (SWT) creation have purpose and value. With respect to the creation of man and Islam as the last revelation given to them, Allah (SWT) has explicitly stated that: "….This day we have perfected for your religion and I have completed my bounties and I am pleased with the religion of Peace (Islam)…. .
The above verse show that the creation of wealth by Allah (SWT) is for mankind. Upon the availability of wealth, individuals or organisation should utilise it for the cause of Allah (SWT), and which definitely including safeguarding the interest of stakeholders. Prophet Muhammad (PHUB) said: "The one who looks after and works for a widow and for a poor person, is like a warrior fighting for Allah's cause or like a person who fasts during the day and performs prayers all night".
According to the preceding, Allah, the Almighty (SWT), highly values the protection and safeguarding of all mankind's interests. The objectives of Shari'ah (Maqasid al-Shari'ah), according to Imam Al-Ghazali, are to promote the well-being of all mankind, which lies in safeguarding their faith (al-din), human life (al-nafs), intellect (al-aql), posterity (al-nasl), and wealth (al-mal); whatever ensures the safeguard of these five serves the public interest and is desirable (Al-Maisawy, 2006). These five values are fundamental to being a human being. To ensure that all activities undertaken can protect the benefit of individuals and communities while also facilitating the improvement and perfection of human life in this world and in the hereafter, the concept of Maqasid al-Shari'ah must be upheld and prioritised at all times. Table 1 summarises the five dimension of Maqasid al-Shari'ah. Individual Muslims must defend their faith as one of their most precious values. ShCC must adhere to Islamic principles and values, so any activities undertaken must serve as a shield to prevent a person from pledging sin, becoming an apostate, or engaging in any activities that will obliterate his religious identity. Protection of Life (al-nafs) Everyone considers life to be extremely important and valuable. Everyone wishes for a better and more secure way of life. It is equally important to protect one's own life, and it is everyone's and society's responsibility to do so. Protection of Intellect (al-'aql) When compared to other forms of creation, human intelligence is a priceless gift from Allah (SWT). Everyone should guard this wonderful gift against anything that could impair its capability and function. Protection of Posterity (al-'nasl) The descendants of a person are an important aspect of their life. The future leaders will be from the young generation. Islam is deeply concerned with a person's posterity and emphasises the importance of safeguarding one's posterity. Protection of Wealth (al-mal) Wealth is a gift from Allah that should be nurtured and used responsibly. The acquisition and use of wealth should be guided by Islamic principles to ensure that all wealth receives God's pleasure and Barakah. Source: (Laldin, 2011) These five values of the objective should serve as the foundation or primary framework for all ShCC conducting business and social activities. The values provide a solid foundation for facilitating the improvement and perfection of human life in this world and the hereafter.
It is consistent with the Shari'ah's objective and rationale of promoting Maslahah (benefits) and repelling harm from the people that Islam emphasises the importance of securing benefit for society. According to (Nor et al., 2012;Rahman et al., 2017) an organisation can apply the principle of Maslahah in all activities to ensure that the Shari'ah principle achieves its objectives. Imam Al-Ghazali defined Maslahah as "an expression for seeking benefit (manfa'ah) or removing something harmful (madarrah), and Maslahah is essentially the preservation of the five principles of Maqasid al-Shari'ah," according to Dusuki & Abdullah (2007), Maslahah is divided into three categories according to Imam Al-Shatibi: daruriyyat (essentials), hajiyyat (complementary), and tahsiniyyat (embellishment). These three categories are ranked in order of importance, and they also serve as a summary of Shari'ah's primary goal. Daruriyyat (essential) is the first category of Maslahah, referring to the necessary aspects of life, which include the five principles of Maqasid al-Shari'ah, which are religion, life, lineage, intellect, and property. This category's absence will result in unneeded adversity. The second category of Maslahah is Hajiyyat (complementary), which refers to aspects of life that supplement the necessities. The final category of Maslahah is The Maslahah pyramid, as depicted in Figure 1, represents a framework and general guideline that managers can use to fulfil their obligation and rectify any potential dilemmas (Dusuki & Abdullah ,2007). The Maslahah pyramid's three levels represent the degrees of importance in fulfilling responsibilities. Furthermore, the pyramid can be implemented to CSR practices. The study by (Dusuki & Abdullah ,2007) that applied the Maslahah pyramid to CSR is summarised in Table 2.  Table 2 describes the significance of applying the three categories of Maslahah to every activity undertaken by the companies, namely essentials (daruriyyat), complementary (hajiyyat), and embellishments (tahsiniyyat). The incorporation of the three Maslahah and five Maqasid al-Shari'ah principles in all activities undertaken will greatly assist in distinguishing an Islamic view of CSR from the conventional view (Jalil, 2006). This is due to the fact that both Maslahah and Maqasid al-Shari'ah refer to "a set of norms, values, and laws that comprise the Islamic way of life" (Dusuki, 2008). As a result, incorporating the norms and values of Maqasid al-Shari'ah and Maslahah component into the activities of ShCC would aid in improving all activities undertaken in accordance with Islamic principles and values.
Furthermore, because Muslims composition approximately 69.8 percent of the Malaysian population by 2021, ShCC must persuade stakeholders that their companies' activities are in accordance with Islamic principles and values by voluntarily disclosing all activities undertaken in their financial reporting. Moreover, in order to attract global Shari'ah capital, the company's activities must adhere to Islamic principles, and the disclosure must be related to the Islamic value. CSR disclosures will improve the company's transparency, build a brand reputation, and provide useful information for investment decisions. Meanwhile, from an Islamic standpoint, CSR disclosure can assist ShCC in demonstrating their responsibility and accountability to the Ummah (public) and Allah Almighty. Furthermore, ShCC must apply the fundamental concepts of Maqasid al-Shari'ah, Maslahah (public good), and voluntary disclosure of Islamic items in addition to the items already reported in their annual report in order to develop Islamic corporate reports (Mazri et al., 2018;Sulaiman & Willet, 2001).
Former Prime Minister Datuk Seri Najib Tun Razak also suggests that Malaysia create a Maqasid al-Shari'ah index to assess Islamic countries' commitment (Abas, 2014). Thus, ShCC must be more transparent (Mazri et al., 2018;Wan Ismail et al., 2015) in disclosing company information, so that the community can learn regarding the societal impact of the companies' activities and operations, as they have a right to know (Baydoun & Willett, 2000).

Corporate Social Responsibility Disclosure
The Malaysian government has put in place a number of frameworks and policies to encourage Malaysian companies to practise greater CSR. As shown in Table 3, the Malaysian government established the following framework and policies:  (Yang & Yaacob, 2012, p.56) The framework and policies outlined above are intended to encourage and stimulate Malaysian companies to participate in and report on their CSR activities. Former Malaysian Prime Minister Abdullah Ahmad Badawi supported these initiatives. In the 2007 budget reading, he made CSR reporting mandatory for all Public Listed Companies (PLCs) to report on environmental and social responsibility performance in annual reports, as customers now have greater access to that information rather than financial information (Ahmad Badawi, 2007). With the introduction of various frameworks and policies, the requirement of financial reporting has expanded to include non-financial information, such as social and environmental information, in addition to financial information.
Unfortunately, PLCs listed under Shari'ah complaint require an extensive framework that can provide Islamic principles and values as a guideline in conducting and reporting CSR activities because ShCC activities must be in line with Islamic principles and achieve Shari'ah objectives ShCC must report on CSR in a more transparent and comprehensive manner, including additional information that reflects Islamic values. As a result, ShCC require an additional framework and set of guidelines to ensure that they adhere to Islamic principles and values.

Dimension of Corporate Social Responsibility Disclosure from the Islamic Perspective
This study looked at four themes in the Bursa Malaysia CSR framework. Marketplace, Workplace, Environment, and Community are the themes. An Islamic CSR index was created by categorising each item from four themes into the five dimensions of Maqasid al-Shari'ah, namely, protection of faith (al-din), protection of life (al-nafs), protection of intellect (al-aql), protection of posterity (al-nasl), and protection of wealth (al-mal), as well as the three levels of Maslahah, namely, essentials (daruriyyat) complementary (hajiyyat) and embellishments (tahsiniyyat).

Marketplace
The marketplace focuses on key activities in the business such as management on supply chain, product quality, safety, innovation, fair pricing and also ethical advertising (Karim et al., 2020). It required a diverse group of people to act in a sustainable manner across the value chain, including shareholders, suppliers, vendors, and customers. (Karim et al., 2020) discovered that CSR practices in the marketplace positively affect market return, which is in accordance with stakeholder theory, which contends that CSR activities benefit stakeholders. Because ShCC are Islamic-based businesses that operate in accordance with Islamic principles and values, every product and service offered must emphasise the protection of faith, human life, intellect, posterity, and wealth. This is consistent with the Quran, which states in Surah al-Baqarah (2:219): "They ask concerning wine and gambling. Say: In them is great sin, and some profit for men; but the sin is greater than the profit". (al-Baqarah: 219) The above verse emphasises that Islam forbids the sale of products or services that cause significant harm, such as cigarettes, alcohol, and gambling. Thus, As a result, quality declarations, safe and sanitary manufacturing processes, competitive pricing and business deals, halal and haram are required. and considered Shari'ah objectives, because they are in line with the Quran's demands for fair, open, and ethical behaviour in all matters (Arsad et al., 2015). Furthermore, Islam enjoins the ethical values of honesty, sincerity, trust, truthfulness, justice, and equity in their business dealings and transactions (Khurshid et al., 2014).

Workplace
A company's relationship with its employees has a major effect on the company's operations. As a result, all companies must be socially responsible to their employees. It is critical to maintain a high level of employee recruitment, development, retention, and well-being. To be consistent with the five dimensions of Maqasid al-Shari'ah, namely, the protection of faith, intellect, life, posterity, and wealth, every company, particularly ShCC, must provide a balance of material and spiritual satisfaction in their employees' life (Arsad et al., 2015). In addition, Islam strongly emphasised for fair labor practices, worker's right and employees' self-esteem in the organisation. This is explicitly encouraged in Islam.  (Sahih Muslim Vol.3,Hadith No.4093.) The preceding Hadith emphasises that everyone is Allah's servant, and no one is nobler than another except Allah (SWT). As a result, in Islam, the spirit of brotherhood and equality in the workplace is extremely important. To ensure that no one is treated unfairly, justice and benevolence should also be emphasized.

Environment
Businesses and industries operation have great environmental impacts, from the release of hazardous pollutants to the consumption of vast amounts of natural resources. Thus, many companies undertake environmental sustainability such a matter of compliance with environmental regulatory and policy requirements, as well as actively carried out environmental programmes such as waste management, conservation of natural resources such as recycling paper, water, metal, etc. Environmental friendly companies able to reduce business risk, improve reputation, cost saving and increase revenue as well The environment and natural resources are highly valued in Islam, with 500 verses in the Quran providing guidance on how to deal with them; and Allah (SWT) condemns environmental exploitation. This statement is found in the Quran, Surah Taha (20:77): "Do not do any mischief on the earth as God dislikes those that make destruction on the earth". (Taha: 77) The preceding Surah emphasises the importance of safeguarding the earth from harm and destruction. As a result, everyone, including businesses, particularly Shari'ah-compliant businesses, must ensure that the environment and natural resources are protected from exploitation, misuse, damage, or pollution; as such actions are prohibited by divine law.

Community
The community theme involves activities that relate to the creation of maximum values to a group of people that living together and practicing common ownership. Islam strongly encourages supporting the community. Statement in the Quran (4:37) highlighted to practice a good deed to every different and categories of people.
"Do good to parents, kinsfolk, orphans, those in need, neighbours who are near, neighbours who are strangers" (An-Nisaa' 4:37) In Islam, equitable distributions of wealth and possession to poor and needy people are constitute an important objective of the Shari'ah. To achieve the five objective of Shari'ah (Maqasid al-Shari'ah),namely, protection of faith, life, intellect, posterity and wealth to community is through charity, generosity and philanthropy (Arsad et al., 2015) as Allah S.W.T. promises will double the wealth to the generous companies or individual. This statement is found in the Quran (64:17): "If ye loan to Allah, a beautiful loan, He will double it to your (credit), and He will grant you forgiveness"  In addition, Muslims with adequate wealth are entitled to pay Zakat. Zakat is one of Islam's social dimensions, and it also applies to companies (Khan & Karim, 2010). Therefore, ShCC that been classified as Islamic based company should also distribute the wealth of their company to poor and needy by contributing to zakat. This is clearly indicated that, Islam strongly emphasised about the transfer of wealth to the community, as it is consistent with the goal of Islamic jurisprudence, which is to safeguard community social order.

Process of Constructing i-CSR Disclosure Index and Content Analysis
The item of i-CSR checklist was constructed based on the four themes of the CSR framework that was established by Bursa Malaysia in 2006 and the items were developed based on previous studies done by (Ousama & Fatima, 2010;Sulaiman, 2005;Haniffa, 2002;Othman, Thani & Ghani, 2009;Maali et al., 2006). In addition, annual report from Middle East countries, annual report of the Prime Minister's CSR Award and National Annual Corporate Report Awards (NACRA). All of the mandatory items required by the approved Accounting Standards, Companies Act, 1965 and Bursa Malaysia Listing Requirement were eliminated in the i-CSR index. A checklist of ninety-three (93) items was used in this study after taking into consideration the ten (10) expert opinions, which were from the regulatory board Shari'ah officer from the Islamic Banking and Finance Institute Malaysia (IBFIM), Shari'ah officer from Jabatan Mufti and Majlis Agama Islam, and academicians from accounting and Islamic studies. Table 4 shows the total number of the i-CSR disclosure item for each theme according to the 5 dimension of Maqasid Shari'ah. While, Table 5 showed a detail item for each four theme, five dimension of Maqasid Shari'ah and 3 level of Maslahah.  Complementary 2 Embellishment 1 THEME: MARKETPLACE 1. Protection of Faith (Al-Din) a. Provision of halal products and services b. Provision of non-permissible products and services c. Disclose type of non-permissible products or services involved d. Disclose percentage of profit contribution from non-permissible activities √ √ √ √ 2. Protection of human life (Al-Nafs) a. Produce products that priorities health, safety and quality features for the consumers b. Ensure safety standards in processing the products c. Train employees on the development of safety standards for the processes d.Display the content of the ingredients of the products e. Disclose that products or services meet the applicable safety standards f. Declaration of the quality, safety and hygienic production process g. Environmentally friendly products and services. h. Employees implement product safety standards or process safety measures. i. Employees implement product quality measures.

Scoring the i-CSR Disclosure Index
In this study, i-CSR Disclosure index was developed by using the nominal score to record the absence (represented by "0") or the presence (represented by "1") of an item which was called the un-weighted approach. Next step is to determine the entire item especially the presence items which was represented by "1" with the level of Maslahah namely essential (Daruriyat), complementary (Hajiyat) and embelishment (Tahsiniyat). These three categories of Maslahah reflect the different degree of responsibility fulfillment, thus it was represented in a 1 to 3 rating scale. Essential (Daruriyyat) is a very important element in the Maslahah, therefore the rating scale for essential (Daruriyat) was 3=very important. While, rating scale for complementary (Hajiyat) was 2=important and embellishment (Tahsiniyat) was 1 = slightly important. After that, each of the presence items is multiply with the scale of the Maslahah. Lastly, the process will add all the scores and equally weighted. The scores will be calculated as follows: i-CSRDI j = nj∑ t=1 Xij*Mij __________________ Nj*3 i-CSRDI j Islamic Corporate Social Responsbility Disclosure Index Nj Number of items expected for the company nj≤ 93 items multiple with the highest level of Maslahah Xij of "1" , if the company disclose the items and "0", if it is not Mij of"3" if the items is Essential, "2" if the items is Complementary and "1" if Embellishment

Limitation and Suggestion
This study does have some limitations. The i-CSR disclosure index was created using the CSR framework established by Bursa Malaysia in 2006, which included the marketplace, workplace, environment, and community, as well as previous studies and the company's annual report, which received the Prime Minister's CSR Award and the National Annual Corporate Report Awards (NACRA