Exploring the Social Reporting Disclosure using Maqashid Sharia
Perspectives
Case Studies to Companies that Listed at Jakarta Islamic Index
Amelia Rizky Alamanda
Department of Accounting,Universitas Padjdjaran, Dipati Ukur 35Bandung, Indonesia
Keywords: Social reporting disclosure, maqashid sharia perspective, Jakarta Islamic Index.
Abstract: Up to May 2011, Indonesia has 30 companies listed in Jakarta Islamic Index. The initial purpose of
establishment of Islamic stock is to achieve and the welfare of the people, in this world and in the hereafter.
To achieve this goal, every Islamic financial institution, including Jakarta Islamic Index, in every single of
aspect of product development and in terms of operation should be based on maqashid sharia. To see
whether the companies grounded in maqashid sharia, the performance measurement must base on the
principle of maqashid sharia. Islamic stock performance measurement is not only focusing on profit or other
financial measures but put other values of Islamic stock companies reflect the contribution in environment
using social reporting.
1 INTRODUCTION
CSR in Indonesia continues to grow in the
implementation and disclosure because of the
growing public attention to the company's
operations. So, the company realizes that the
survival of the company depends on the relationship
with the communities and environment in which it
operates. With the Law No. 40 of 2007, which
explains that the company running its business
activities relating to natural resources required to
implement social and environmental responsibility,
if it is breached it will be sanctioned in accordance
with the provisions of the legislation in force.
As the development of conventional economics,
Islamic economic also experience growth. It is
marked by the increasing number of companies that
carry out business activities based on Islamic
principles. Therefore, the concept of CSR began to
flourish in Islamic economic.
For companies that run their business based on
the Islamic principles, including companies
belonging to the Islamic capital market are expected
to provide a disclosure of the religious dimension in
the annual report so as to be useful to stakeholders
(Othman and Thani, 2010). Islamic Social Reporting
(ISR) was first proposed by Haniffa (2002) entitled
"Social Reporting Disclosure: An Islamic
Perspective". ISR then further developed more
extensively by Rohana Othman, Azlan Md Thani,
and Erlane K Ghani in 2009 in Malaysia. Islamic
Social Reporting not only helps provide information
to stakeholders Muslims to take decisions, but also
helps management to meet obligations to God,
society, and the environment (Othman and Thani,
2010).
Implementation of Islamic Social Reporting is
still being debated. Given the rating of the
company's performance in environmental
management in 2013-2014, better known by the
rating PROPER show the result that many
companies are not responsible for the environment.
Companies that received red ratings amounted to
516 enterprises, and companies that were rated black
numbered 21 companies (menlh.go.id). Where as
many as 239 companies that received red ratings and
11 companies were ranked the black from the
manufacturing sector.
Cases on CSR that still occur in Indonesia, such
as the disposal of various hazardous chemicals by
the industry to the CRB making polluted Citarum
River and holds the title as the most polluted river in
the world by National Geographic in 2010
(csrindonesia.com), industrial waste PT Wings
Surya expressed sewage exceeded the quality
standards so that damaged about 18 hectares of rice
380
Alamanda, A.
Exploring the Social Reporting Disclosure using Maqashid Sharia Perspectives - Case Studies to Companies that Listed at Jakarta Islamic Index.
In Proceedings of the 1st International Conference on Islamic Economics, Business, and Philanthropy (ICIEBP 2017) - Transforming Islamic Economy and Societies, pages 380-383
ISBN: 978-989-758-315-5
Copyright © 2018 by SCITEPRESS – Science and Technology Publications, Lda. All r ights reserved

belonging to village residents Driyorejo, District
Driyorejo, Gresik (nasional.kompas.com), pollution
of wood processing plants and furniture, PT Pinako
Rotary Permai in which hundreds of students and
nearby residents breathing problems
(regional.kompas.com). In addition, the problem of
counterfeiting label halal happened in Riau Islands
became disturbing residents. Halalness of what is
consumed is a very sensitive issue and can be fatal
to themselves as well as companies, including world
and the hereafter (www.halalmui.org).
From some explanations and examples of cases
that occurred in Indonesia, show that companies do
not carry out social responsibilities well. This is not
in accordance with Sharia Enterprise Theory, which
explains that God as the center of everything and be
the center point of the return of the man and the
universe (Amanda and Agung, 2016). Therefore,
people here just as His representative (Khalifa fil
ard) that has a consequence to comply with all the
laws of God in bringing the mission of creating and
distributing well-being for humans and nature.
Given Sharia
Sharia Enterprise Theory refers to the
responsibility towards Allah SWT is certainly a
company registered in Sharia Stock Index must
undertake responsibility for its performance. One
form of corporate liability for the mandate given by
Allah SWT is by making one disclosure ISR
disclosure in the annual report of the company.
Islamic Social Reporting CSR is a concept
developed in Islamic economy. Research Hong and
Andersen (2011) stated more companies disclose
CSR, the higher the quality of the accrual and
reduced earnings management activities.
2 LITERATURE REVIEW
Increasing number of companies registered in
Jakarta Islamic Index but will steal more concern to
many people as well as how the company convince
them with the information that companies are
reported in the form of financial statements and
annual reports. According to Sofyan (2009), the
financial statements are the end result of the
accounting process. Where the accounting process
will not be separated from the accounting policies
chosen by the company. The company's annual
report that reveals social responsibility cannot be
separated from management policy. So, it could be
an opportunity for the management to fulfil their
own desires.
For companies listed in JII which means the
company has been running its operations based on
Islamic principles, but in living humans as subjects
of economic life is considered not everyone is good.
This is consistent with agency theory proposed by
Eisenhardt (1989), which uses three assumptions of
human nature, namely, human beings are generally
selfish (self-interest), human beings have the power
of thought limited on the perceptions of the future
(bounded rationality), and humans always avoid risk
(risk averse). The theory also mentions the existence
of different interests between principal and agent
that will cause opportunistic nature so that the agent
(management) are driven to perform earnings
management solely to optimize the well-being of
himself and no longer works to maximize the benefit
and welfare of shareholders. In the end, if indicated
the company is doing earnings management, the
market response will be negative reflecting the
company's earnings quality is low.
Every company financial statements that reflect
management success can be seen from the profits
earned by the company. However, from some
previous explanations can lead to gains that are not
qualified.
Corporate Social Responsibility is a commitment
of the company or the business world to contribute
to the economic development in a sustainable
corporate social responsibility, which focuses on the
balance between attention to economic, social and
environmental (Hans et al., 2015). CSR can be said
that in addition to having economic and legal
obligations to shareholders, the company is also
expected to have attention to stakeholders (Rulfah
and Nur, 2008). Stakeholders are intended not only
businesses and shareholders of the company, but
includes the surrounding communities and the
communities involved, consumers, employees,
communities and the environment in all aspects of
company operations.
According to Junaidi (2015), there is a
fundamental difference between the concept of CSR
in conventional and Islamic perspectives. CSR in the
concept of Islam must be in accordance with the
Qur'an and Sunnah. While CSR in western concept
sometimes cannot be separated from the interests of
the company itself so that the implementation of
CSR be biased.
The concept of CSR is not only growing in
conventional economics, but in an Islamic economy
is also experiencing growth. CSR concept in Islam is
closely related to the companies that run business
activities in accordance with this concept so
hopefully the company can undertake corporate
Exploring the Social Reporting Disclosure using Maqashid Sharia Perspectives - Case Studies to Companies that Listed at Jakarta Islamic
Index
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social responsibility islamically. Haniffa (2002)
revealed that the limitations of conventional social
reporting so that he put forward the conceptual
framework of Islamic Social Reporting (ISR). The
purpose of the ISR is to demonstrate accountability
to God and the community and to increase the
transparency of business activities by providing
relevant information tailored to the needs of decision
makers Muslim spiritual (Haniffa, 2002).
With the development of the Islamic capital
market, the companies included into the List of
Islamic Securities is expected to give a religious
dimension in the annual report for the benefit of
stakeholders Muslims (Othman and Thani, 2010).
Therefore, it takes a reference (guideline) to measure
the extent of the companies contained in Sharia
Securities List making social responsibility report
that also presents aspects of religion in the annual
report (Septi and Surya, 2012).
The annual report is one of the media direct
communication between companies and investors
(Rulfah and Nur, 2008). Islamic Social Reporting
which is additional information in the annual report
of the company, which in Islamic economics
accountability needed to produce a true and fair
disclosure and transparency. So that disclosure of
financial and non-financial facts should contain
information that is correct, accurate and available
free to users (Junaidi, 2015). Therefore, the
company revealed the Islamic Social Reporting is
expected to make the information in the financial
statements more relevant, it indicates that the high
quality of financial reporting.
Based on the linkages with financial goals in life
cycle explicitly that the company's long-term goals
are investors and improve company performance
(Kaplan and Norton, 1996). Age company is
considered the investor in making an investment, a
company's age reflects the company survive and be
evidence that the company is able to compete and be
able to take business opportunities that exist in the
economy.
3 METHODOLOGIES
This study was taken in 2016, the researchers used a
year to explore the Social Reporting Disclosure in
Companies listed at Jakarta Islamic Index. The level
of disclosure in this study using the ISR Index,
which consists of six themes with 43 items that have
been put forward by Othman and Thani (2010).
Measurement ISR using a scoring index with a value
of 0 and 1. Score 0 not to disclose and score 1 for
the express ISR at the company's annual report.
Here's the formula for calculating the amount of
disclosure level after scoring on the index ISR:
Disclosure Level = (Required Score Disclosure)/
(Maximum Score Disclosure).
The form should be completed and signed by one
author on behalf of all the other authors.
4 RESULTS AND DISCUSSION
Data necessary to perform the disclosure of social
reporting came from annual reports for 2016. The
table is shown in Appendix B. Adequate disclosure
of social reporting will make it accessible, which
will have an impact on improving the company’s
image. This will ultimately improve the financial
performance of companies, which would impact the
increase in profits and variety of social activities. So,
in the end, it will create a shared value between
companies and mutual societies. Shared value is also
in line with the concept of “Falah” Today, social
reporting is not only growing in the conventional
companies, but also in Islamic Financial Institutions.
Jakarta Islamic Index is a place for the companies to
implement Sharia rules in accordance with the
teaching of Islam.
5 CONCLUSIONS
CSR in Indonesia continues to grow in the
implementation and disclosure because of the
growing public attention to the company's
operations. As the development of conventional
economics, Islamic economic also experience
growth. It is marked by the increasing number of
companies that carry out business activities based on
Islamic principles. The table is shown in Appendix
B. Adequate disclosure of social reporting will make
it accessible, which will have an impact on
improving the company’s image. This will
ultimately improve the financial performance of
companies, which would impact the increase in
profits and variety of social activities. So, in the end,
it will create a shared value between companies and
mutual societies.
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