The role of institutional drivers in corporate zakat implementation for CSR: a study of Malaysian Corporations

Corporate Social Responsibility (CSR) is gaining popularity, and an increasing number of firms are dedicating extensive efforts and resources to strategically implement CSR initiatives. Companies have grown increasingly attentive to optimizing their resource allocation for maximum societal benefit resulting in sustainable CSR initiatives. In addition to their usual CSR initiatives, companies in Malaysia can leverage the use of Islamic social finance tools, such as corporate zakat, for their CSR efforts. Corporations are now started to assess their social performance by measuring the social impact of interventions, projects, and programs to assist them for evidence-based decision making and strategic resource allocation. The assessment of social performance is also needed for their zakat funded social initiatives to align with corporate’s social mission and social legitimacy purposes. The current study utilizes institutional theory to comprehend the effectiveness of institutional drivers in influencing management's decision to allocate zakat funds for the sustainable zakat funded social initiatives. A questionnaire study was carried out on 96 corporate zakat payers at the Zakat Collection Centre, Federal Territories Islamic Religious Council (PPZMAIWP). The results suggest that CSR regulatory framework and tax incentives have a substantial impact on the decision to incorporate zakat into CSR as part of corporates’ sustainability efforts. Therefore, the results of this study suggest that a consistent oversight from regulators through a robust regulatory framework and tax incentive will help Malaysian corporations fully utilize the corporate zakat fund to make significant contributions to society through sustainable zakat funded social initiatives.