Islamic Business Ethics and Corporate Social Responsibility in Halal Businesses

Abstract

This paper aims at evaluating the impact of Islamic business ethics, CSR, and business performance from the Halal industry in Southeast Asia. Therefore, using both quantitative and qualitative methodologies, the paper analyses the effects of compliance with Islamic ethical standards concerning CSR on business performance. Responses were obtained from 200 Halal-certified organisations from both Malaysia and Indonesia with businesses ranging from food, finance and cosmetics. A set of hypotheses which were developed based on the literature review was employed in testing the model analytically through Structural Equation Modeling (SEM) while the qualitative analysis afforded a measure of elaboration of the postulations as to how Islamic ethics shape organizational conduct. It is evident that Islamic business ethics have a positive influence on the extent of engaging in CSR with CSR playing a moderating role between ethical behaviour and business performance. Companies which include Islamic aspects in their CSR performances not only increase their competitive advantage in the market but also gain higher credibility with interested parties, which will result positive change on their financial performance. The studies stress the importance of using business values in line with religious and ethical system, especially Halal sector that focuses on the trust of consumers and the compliance with Sharia law. The current study adds new knowledge to the knowledge base by presenting survey data in support of the proposition that Islamic ethics forms the foundation for responsible business and economic prosperity.