Comparison of Sustainability Performance Reporting Practices in Islamic Versus Conventional Banks: Evidence from the GCC Region

Mohamed Chakib Kolsi and Ahmad Al-Hiyari

Chapter 11 in Islamic Accounting and Finance:A Handbook, 2023, pp 345-365 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Islamic banks are presumed to behave ethically toward numerous stakeholders, including investors, customers, governmental authorities, and the public in general, within the Islamic jurisprudence (Sharia) prescriptions. One of the most important pillars of Sharia prescriptions is the protection of all parties, interests rather than the conventional notion of financial performance maximization of shareholders. This principle is the core value of the stakeholder’s theory and the derived corporate social responsibility (CSR) notion. In this chapter, we compare CSR practices as proxied by the reported ESG performance score for a sample of both Islamic and conventional banks in the GCC region for the period 2009–2019. Our results show that conventional banks and Islamic banks display different outcomes in ESG performance score, especially in the reporting of individual pillars (environmental, social, and governance). In that, Islamic banks perform on average better than conventional banks in most of the ESG performance pillars. Most importantly, our findings show that Islamic banks, and conventional banks, sustainability practices differ when the individual pillars are disaggregated into their main components: emission score, environmental innovation, and resources use for the environmental pillar; human rights, workforce, community, and product responsibility scores for the social pillar; management, CSR strategy, and shareholders scores for the governance score. Our findings can be helpful to Islamic banks’ managers looking for more compliance with sustainability standards and for markets and standardization authorities when issuing new sustainability guidelines.

Keywords: Islamic Accounting; Islamic Finance; Islamic Banking; AAOIFI (search for similar items in EconPapers)
JEL-codes: G34 M41 (search for similar items in EconPapers)
Date: 2023
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