THE EFFECT OF ENVIRONMENTAL, SOCIAL, AND GOVERNANCE PERFORMANCE ON PROFIT SUSTAINABILITY WITHIN THE MAQASID SYARIAH FRAMEWORK FOR COMPANIES LISTED ON THE INDONESIA SHARIA STOCK INDEX

Abstract

The increasing implementation of Environmental, Social, and Governance (ESG) practices has raised questions about whether sustainability-oriented corporate practices contribute to long-term financial performance, particularly among Sharia-compliant companies. This study examines the effect of the Environmental, Social, and Governance pillars on profit sustainability among companies listed on the Indonesia Sharia Stock Index (ISSI) from the perspective of Maqasid Syariah. Maqasid Syariah is positioned as a philosophical foundation for interpreting ESG practices, especially maslahah and the protection of wealth (Hifdz al-Maal), rather than as a statistical variable. A quantitative explanatory approach was employed using secondary data from annual reports, sustainability reports, and ESG information. The sample consists of 30 Sharia-compliant issuers observed during 2021–2024, producing 120 firm-year observations. Panel data regression was conducted after Chow, Hausman, and Lagrange Multiplier specification tests. The results show that the Environmental pillar has a positive but insignificant effect on profit sustainability (β = 0.1246; p = 0.5781), the social pillar has a positive but insignificant effect (β = 0.1061; p = 0.7065), and the Governance pillar has a negative but insignificant effect (β = −0.1623; p = 0.4958). The findings indicate that ESG implementation has not yet translated into measurable short-term improvements in sustainable profitability among the sampled Sharia-compliant issuers. The study contributes empirical evidence to ESG and Islamic finance literature by positioning Maqasid Syariah as a theoretical lens for interpreting the financial implications of ESG performance.