Exploring the Environmental Reporting Practices of Islamic Banks: A Case of Malaysia and Indonesia

Abstract

This study aims to explore the specific CSR practices i.e. the dimension of environment from an Islamic perspective. The three key principles in Islam, which comprise of vicegerent (khalifah), divine accountability, and obligation to enjoin good and forbid evil guide the understanding of business organizations’ engagement to care for the natural environment. Annual reports (2007-2011) of six full-fledged Islamic banks in Malaysia and Indonesia have been analysed via content analysis method. The environmental information reported has been collected using a combined index developed from the AAOIFI’s (2005) guidelines and significant prevailing literature. It is found that despite the indication of preserving the environment through banks’ business activities, the environmental reporting practices of all the banks in both countries are yet to improve.The study offers insights pertaining to the influence of religion i.e. Islam on the extent of environmental reporting practice.

Keywords: environmental reporting, Islamic bank, annual report, Malaysia, Indonesia