Sharia Accounting and ESG: Building a Reporting System That Is Oriented Towards Sustainability and Islamic Values

Abstract

The transformation towards a sustainable economy has encouraged companies to no longer only be oriented towards achieving profits, but also pay attention to environmental, social, and governance quality impacts through an Environmental, Social, and Governance (ESG) approach. In the context of Islamic economics, sustainability orientation has a strong relationship with the principles of sharia accounting which emphasizes trust, fairness, transparency, benefit, and accountability. This research aims to analyze the relationship between sharia accounting and ESG and formulate a reporting system framework that is able to integrate financial information, sustainability, and compliance with Islamic values. The research uses a qualitative approach with an integrative literature study method on scientific articles, accounting and sustainability standards, and regulations related to sustainable finance. The results of the study show that ESG and sharia accounting have a strong common ground in the aspects of environmental protection, social justice, ethical governance, transparency, and long-term value creation. However, ESG does not fully represent the characteristics of sharia because it does not specifically measure compliance with the prohibition of riba, gharar, maysir, zakat distribution, non-halal income, and the achievement of maqāṣid al-sharī'ah. This study proposes an integrated reporting system consisting of four layers, namely financial performance, ESG performance, sharia compliance and maqāṣid al-sharī'ah, as well as governance and assurance. The framework is expected to strengthen accountability, reduce the risk of greenwashing and symbolic sharia compliance, and improve the quality of information for investors and stakeholders.