What are challenges adopting ESG framework towards halal industry players?

Sharul Naim Sallehuddin @Sharul-Sallehuddin

05 August 2023 1 4K Report

I am exploring the literature regarding halal industry, halal economy, and

what are the outcomes of organization in the halal industry commiting towards ESG principles in daily business

The adoption of Environmental, Social, and Governance (ESG) frameworks within the halal industry, which focuses on products and services adhering to Islamic dietary laws and ethical principles, can present several unique challenges. Integrating ESG practices into the halal industry requires addressing both sustainability and ethical considerations while aligning with Islamic values.

Here are some challenges that may arise:

Complex Supply Chains: Halal products often have complex supply chains involving multiple stakeholders, from farmers and suppliers to distributors and retailers. Ensuring transparency and sustainability throughout these supply chains can be challenging.

Limited Awareness and Education: There might be a lack of awareness and understanding of ESG concepts within the halal industry. Many stakeholders, including producers, consumers, and regulators, may need education about the benefits and importance of ESG practices.

Balancing Halal Requirements and Sustainability: Integrating ESG practices while adhering to halal requirements can be complex. For example, ensuring animal welfare aligns with both halal guidelines and ethical considerations related to ESG.

Cultural and Regional Differences: The halal industry operates in diverse cultural and regional contexts. ESG practices need to consider local norms and regulations, making it challenging to implement a one-size-fits-all approach.

Access to Resources: Smaller halal industry players might lack the resources—financial, human, and technological—required to implement comprehensive ESG initiatives.

Standardization and Certification: Developing universally recognized ESG standards and certifications tailored to the halal industry can be difficult. Without clear guidelines, it's challenging for stakeholders to know what ESG practices to adopt and how to measure them.

Reporting and Transparency: Transparent reporting of ESG efforts is essential for accountability and trust. However, reporting mechanisms that address both ESG and halal aspects might not yet be well-established.

Regulatory Frameworks: ESG practices might not be fully integrated into the regulatory frameworks governing the halal industry in some regions. This lack of regulatory support can hinder the adoption of ESG initiatives.

Consumer Awareness and Demand: While there's a growing global interest in ESG practices, the awareness and demand for ESG-focused halal products might vary across different consumer segments and regions.

Integration of Islamic Ethics: Aligning ESG practices with Islamic ethics requires careful consideration. Balancing environmental sustainability, social responsibility, and Islamic principles can be intricate.

Cost Considerations: Implementing ESG practices can initially involve costs for technology upgrades, training, and process changes. Small and medium-sized enterprises (SMEs) within the halal industry might find these costs challenging to manage.

Measurement and Metrics: Developing appropriate metrics and tools for measuring the social and environmental impact of ESG initiatives within the halal industry can be challenging due to the unique nature of the products and services.

Despite these challenges, many players in the halal industry are recognizing the importance of sustainability and ethical considerations. Collaboration among stakeholders, education, industry-wide initiatives, and innovative approaches are key to overcoming these challenges and successfully integrating ESG practices within the halal industry.

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