Institutional isomorphism and environmental sustainability: a new framework from the Shariah perspective

Islam emphasizes the importance of environmental care, as prescribed in its primary sources of Shariah, the Quran and the authenticated actions and words (Sunnah and Hadith) of the Prophet Muhammad (pbuh). While there is a vast amount of literature on environmental issues, the role of Islam especially in the context of corporate environmental sustainability has not garnered much attention. This study seeks to understand how the managers of public listed firms perceive environmental issues and how their perceptions contribute to environmental sustainability. As prior studies have shown that the industrial sector is a major contributor to environmental problems, it is important to examine the issue from the perspective of individuals that have the ability to direct firms in this sector. The findings of this research show that firms respond to secular coercive, normative, and mimetic isomorphic pressures from various stakeholders in matters pertaining to the environment. However, Shariah does not influence managers’ environmental beliefs and the way they drive corporate environmentalism. The ineffectiveness of existing secular institutions in being able to modify firm behaviour, from the mere meeting of minimum standards to the achievement of global best practices, shows an urgent need for an alternative approach to addressing environmental problems in Malaysia. Given that Shariah is a strong influence on important aspects of life in Malaysia, we propose a new Shariah-based framework for corporate environmental sustainability. The findings of this study provide support to governments and other relevant bodies involved in developing policies regarding environmental sustainability.