The 11th Islamic Economics Workshop, organized by the Islamic Economics Research Center (IKAM) on October 13-15, 2023, focused on economic crises. During the two-day workshop, which was attended by scholars from countries such as Indonesia, Qatar, Malaysia, Pakistan, the United Arab Emirates, as well as Turkey, presentations were made on the causes of environmental crises and ways to combat these crises and what Islamic economics and finance can offer.
Within the scope of the workshop, the following issues were discussed and decided to be shared with the public:
1. Mainstream economics, and in particular the current growth-oriented economic model, is the source of many of today’s crises and especially environmental crises. This is because such an economic model aims only at maximizing profit and production and creating a consumer society where the negative consequences of this process are ignored. This, in turn, leads to significant problems over time and undermines the ability of the world to be a habitable place. Therefore, this economic model that dominates the world needs to be seriously questioned.
2. The linear process of the economy and the natural consequences of capitalism have caused the execution of resources for the sake of development. After serious financial crisis, the common sense of the world has admitted their problems in a conventional manner. So, economists have begun the search for more sustainable economic and financial systems. The idea that one should operate in a manner where they provide dignified people and consider the needs of the next generations has become widespread, especially in the last three decades. This understanding contributed and paved a way to the notion of sustainability which laeaded to taking measures to solve fundamental problems such as income and wealth inequality, poverty, corruption, climate change, and decrease of biodiversity .
3. As a result of the global concern about the effect of human actions on the environment, the idea of sustainability received serious attention and many research and publications has been made in line with the United Nations sustainable development goals (SDGs).
4. With this perspective, in addition to financial reporting, reports need to comply with environmental, social, and governance principles and rules.
5. Contrary to the capitalist, and socialist understanding and practice, the Islamic economy is already guided by the motivation of comprehensive development and environmental preservation in a universal and sustainable manner as manifested in Maqasid-ul Shariah. Islamic economy is based on a circular manner which prevents the depletion of resources and environmental disasters. In principle, compliance with Islamic economics principles should already be comprehended as inclusion of ESGs and and therefore those firms and projects included in the Islamic indexes are expected to be also included within the ESG indexes. However, Shariah compliance is currently and has still been preserved as if it has nothing to do with ESG principles.
6. Natural systems are by design in a dynamic equilibrium, unless transgressed by mankind. There is no waste in the natural system. Natural systems are balanced in dynamic equilibrium, they are regenerative and redistributive. So, entrepreneurs must be aware of this natural system and its criticality. Otherwise, there would be negative externalities of the economy for society and the ecological environment. So, entrepreneurs must maximize positive externalities and minimize negative externalities, therefore they can positively contribute to the dynamic equilibrium.
7. Even though liberal economy’s vision was to increase production through technology and the people who consumes these products wouldincrease their happiness which would lead to the ultimate goal of increasing the utility level of society, has not been realized fully. Production maximization has been achieced. Yet there are 4 main problems come forward: environmental problems, income distribution, overuse of resources which we are consuming the rights of the next generations and decreasing biodiversity.
8. Circular economy can be a solution against environmental issues going worse. In this respect, Cramer’s 10R principles (refuse, reduce, renew, redesign, reuse, refurbish, remanufacture, repurpose, recycle, recover) can be implemented. Yet, there is not much success in the application of these principles especially on refuse and reduce principles. For example, in European Union countries or others, where the circular economy became a part of the law, the consumption levels in recent years are not falling. So, unless refuse and reduse concepts are revived, other steps of 10R do not seem to be sufficient to reach the targets. For example, plastic packaging waste generated and recycled in the EU is in an increasing trend but the produced waste amount of it is not decreasing and a more than %90 of these plastics collected are not recycled due to economic inefficiencyTherefore, just relying on technology and laws without a major change in our paradigm of how we consume, it is not possible to reverse environmental problems. This is also a key to uneven income distribution, resource overuse, and loss of biodiversity. Even though recycling is very important, it is not sufficient to bring nature back to its original balance at creation.
9. Liberal economy defines need as limitless; meeting limitless needs with limited resources. However, according to Islamic economics, needs are limited; limited resources, limited needs, and unlimited wants.
10. There is a positive correlation between waste generation and income level. 1.3 billion tons of food are lost and wasted annually, which is enough to feed 3 billion people. Food losses and waste amount to roughly US$ 680 billion in industrialized countries and US$ 310 billion in developing countries. Despite the fact that developed countries have only 1/5 of the population of developing countries, both industrialized and developing countries waste approximately the same amount of food, with each dissipating around 670 and 630 million tons, respectively. An estimated 8% of annual greenhouse gas emissions are created as a result of producing food that is either lost or wasted. An area larger than China and 25% of the world’s freshwater supply is used to grow food that has never eaten. The solution is not to produce more than one need’s.
11.The intersection of sustainability and finance led to the innovation of “green finance,” which focuses on channeling a capital towards environmentally friendly and socially responsible projects.
12.In the face of environmental crises, the use of Islamic economics’ commercial and social financial institutions, profit-loss partnership and real economic transactions centered on the principle of trade offer powerful alternatives to the current economic approach. In this context, it is a must to focus on real economic transactions with sustainable economic measures by considering ecological, environmental, and social problems together as a way out of the current economic crises.
Scholars participating in the 11th Islamic Economics Workshop organized by the Research Center for Islamic Economics (IKAM) on October 13-15, 2023 once again emphasized the importance of the institutions and tools of Islamic economics and finance in overcoming environmental crises.
