Meeting Economic, Environmental, Social and Governance Compliance Through Zakat: Its Challenges and Way Forward for Malaysian Listed Companies

Zakat, as one of five Islam pillars, is a compulsory act of almsgiving for wealth redistribution, poverty reduction, and social welfare promotion. Although classically considered a religious obligation, zakat is being increasingly conceptualized in sustainability and good governance terms. At the same time, Economic, Environmental, Social, and Governance (EESG) framework have gained global traction as the key driver of moral and sustainable business. There are several discussion explained that the practice of zakat can be mapped strategically onto EESG principles, particularly the “Social” and “Governance” dimensions, by its advocacy of social justice, transparency, and accountability of institutions. Following a literature-based review methodology, this study distills evidence from past studies related to Zakat practice in enhancing EESG compliance. This paper explores several challenges, ranging from limited standardized zakat- EESG framework in terms of performance metrics and weak regulatory oversight. Despite these challenges, this paper concludes that Zakat holds high potential as a faith-based institution for promoting sustainable development and responsible governance. Some of way forwards to enhance the compliance of zakat in EESG framework through developing an integrated Zakat-EESG reporting standards particularly for Malaysian listed companies and encouraging regulatory reforms as a driver to contribute zakat towards modern sustainability frameworks.