Islamic Reporting Initiative: Aligning local culture with CSR

A 'one-size-fits-all' approach to CSR reporting is becoming irrelevant and impractical, writes Daan Elffers, who has launched a new framework to align sustainable business with local principles and values.


Corporate sustainability and social responsibility (CSR) is, in the broadest sense, an organisations’ contribution to sustainable development and so it makes sense to use the concept to address the challenges most pertinent to an organisation and its locality.

However, given the scope of CSR and with many recognising the potential synergies with theories of green and circular economy, there is much ambiguity concerning the most appropriate strategy for individual businesses. With international standards presenting a conceptual benchmark to strive for, numerous businesses are implementing policies that have little or no relevance to their own, local ventures, minimising the potential of CSR.

Cultural context

The importance of local values and their contribution towards informing international standards has often been neglected by existing CSR reporting tools – largely international frameworks – which, in effect, has left the nuances of culture unique to the local level out of many CSR policies.

The Islamic Reporting Initiative (IRI), established to be the first integrated CSR reporting framework built on Islamic principles, aspires to embrace the compatibility of culture in achieving the ambitions of CSR. The inclusion of culture is anticipated to help develop a comprehensive CSR strategy that is reflective and reactive of an organisation’s immediate socio-economic and environmental challenges, and deliverable through a culturally-sensitive approach.

“International standards in CSR are sometimes thought to be universal but they seldom are. They are based upon international experience and best practice but that does not mean that they can replace local values.” So says Dr Sied Sadek, managing director of sustainability auditors, DQS CFS and DQS Middle East, and one of the latest corporate partners to the IRI.

The Islamic Reporting initiative has been developed in line with research confirming that current, broad tools for CSR reporting are not always as practical or relevant in a local context. This means that many cultural aspects that complement and contribute to the overall objectives of CSR are overlooked, reducing the potential of the strategy. This, I believe is, in part, reason for the limited number of CSR reports that are accessible, despite the prevalence of CSR-related practice in these countries.

The IRI has recognised that international standards often use a vocabulary that is not always attuned to local mindsets and modes of thinking and living. That does not make them any less relevant but it does mean it is sometimes challenging for Islamic organisations to fully embrace these standards without losing sight of Islamic principles and values.

Competetive edge

Dr Sadek, who has been working with standards for 30 years, anticipates Islamic countries to follow a similar trajectory as other countries, with more and more organisations reporting on their environmental performance, energy management, labour conditions, business ethics, and their value in the marketplace and towards society. This being because, while the local priorities vary, the underlying factors that drive CSR reporting are similar across the globe, with the public having a strong appreciation for organizations that uphold strong values and ethics.

The IRI has been developed to facilitate this trajectory of increasing CSR reporting, by providing a relevant means through which companies in over 50 Islamic countries can report in a meaningful way. By doing so, organisations conducting IRI reporting will not only succeed in understanding international expectations but will harmonise them with the local culture, generating a competitive edge. “We believe it will motivate more organisations to report, raise awareness among the public and contribute to the diversity of the Islamic world,” says Dr Sadek.

CSR has long been a moral initiative in the Islamic world, with philanthropy, social responsibility and social entrepreneurship embedded deeply within the culture. By finding strategic alignment between these practices, the IRI sees them as becoming empowered to self-generate on-going development.

Organisations achieving this become engaged in a virtuous process, whereby a CSR initiative serves to strengthen a community or environment which, in turn, safeguards business opportunities in the mid to long-term. Understood in this context, CSR and philanthropy have the capacity to provide long-term security to society and business. The IRI recognizes this relationship and positions philanthropy as a key partner of CSR. Such an interpretation fosters a CSR approach which is unique to and embracing of, Islamic business culture.

The IRI is encouraging a move towards integrated reporting and away from the more typical, stand-alone style of sustainability reporting that is characteristic of many businesses. Integrated reporting gives equal weighting to finance and non-finance related indicators and presents them as one, interrelated unit.

Social impact

With this in mind, it is essential that the reporting framework is compatible with the method of finance that underpins the organization, of which, in many companies operating in the Islamic world, is Sharia-compliant finance. A recent study showed that Sharia-compliant finance is estimated to grow by an average of almost 20% per year to 2018, making it the fastest growing finance type. In response to this growth in Islamic banking and the trajectory towards integrated reporting, the IRI seeks to be compatible with these principles, making it unique to other reporting standards.

This interest in the financial element is further necessitated with the current shifts in the investment market, which are demonstrating considerable interest in socially responsible businesses. The establishment of the social stock exchange (SSX) is indicative of this shift, becoming the first platform of its kind in the world to serve as a marketplace for publicly listed social impact business.

The global market for social impact investment has been estimated to be worth US$9bn and is expected to grow to between US$200bn and US$660bn in the next decade, which indicates the investment potential for organisations performing responsibly and sustainably. The strategic partnership between the SSX and IRI intends to support national and international companies operating in the Islamic world with integrated, triple-bottom-line reporting.

Alongside strategic partnerships with DQS CFS and DQS Middle East and the SSX, the IRI now has partners from over 20 countries across the MENA region, South Asia, Africa and Europe. Partners represent governmental bodies, corporations and non-governmental organizations across sectors, including finance, health and environment. The Advisory Board, chaired by myself, features Jordan’s Minister of Environment, H.E. Dr Taher Shakhshir.

The IRI is inviting organizations to collaborate in the further development and wide-spread implementation of the IRI.

Daan Elffers is co-founder and chairman of the Islamic Reporting Initiative, which launched earlier this year.

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