The Practical Implications of Halal Manufacturing on Halal Organizational Sustainability Performance in the Malaysian Halal Industry

The Practical Implications of Halal Manufacturing on Halal Organizational Sustainability Performance in the Malaysian Halal Industry

Khairulazmi Mohamad Karudin¹, Mohd Rizaimy Shaharudin²*, Amir Imran Zainoddin¹

¹Department of Business and Management, Faculty of Business and Management, Universiti Teknologi MARA, 85000 Segamat, Johor.

²Faculty of Business and Management, Universiti Teknologi MARA, 08400 Kedah, Malaysia

*Corresponding Author

DOI: https://dx.doi.org/10.47772/IJRISS.2024.8090244

Received: 17 September 2024; Accepted: 23 September 2024; Published: 19 October 2024

ABSTRACT

Halal manufacturing still lags in sustainable manufacturing, and the current practice is considered to remain unaffected. Most issues in Malaysian halal manufacturing are hygiene, halal certification, and mismanaging manufacturing progress. Meanwhile, waste generated from halal manufacturing has not complied with the right standards. For example, most water areas have been contaminated by waste produced from halal manufacturing, requiring significant efforts from the Malaysian government to overcome this issue. However, awareness and continuous practice by manufacturers are still repetitive. This study aims to develop a theoretical framework on how halal manufacturing affects halal organizational sustainability performance. Institutional theory (IT) is applied as the underpinning theory for this study. This conceptual model illustrates how halal manufacturing influences organizational sustainability performance, resulting in reputational, financial, and competitive benefits. The study is expected to contribute new insights to theoretical considerations regarding practical knowledge of halal manufacturing and the concept of halal organizational sustainability performance, that can be used to improve and enhance Malaysian halal producers’ practice in the halal industry. Throughout this research, several values can be stressed to the benefit of those in academic and industrial practices. Malaysian halal producers are recommended in this study to implement halal manufacturing that aligns with halal standards to achieve halal organizational sustainability performance.

Keywords: Malaysian Halal Producers, Halal Manufacturing, Halal Organizational Sustainability Performance

INTRODUCTION

The global halal food market by itself as stated by More (2021), was valued at US$1140 million in the year 2018 and it was showing growth at 1294.5 million US dollars in the year 2020 even past the global pandemic COVID-19 and it is expected to reach US$1590 million by the year 2025. This number is measured by total international trade from halal foods trading and commercial services of halal foods that have been growing in the global halal market. The globe has experienced global pandemic disasters, global wars, global climate change and global socioeconomic instability but despite all of this, there has been an increase in halal market growth (The Malaysian Reserve, 2022). Lately, the thought of sustainability performance in halal organizations has lengthened wider implications in halal research. Several aspects of environmental, socio-economic, community social responsibility, healthcare, security and hygiene are among the advantages to accolade with the profitability of halal business determination (Norazlina, et al., 2021). Additionally, the ongoing straining from halal globalization and competitiveness has directed several scenarios on safety, hygiene, cleanliness, security, environmental protection and ethical concerns and partake enormous pressure on the halal business (Rajeb et al., 2021).

Concerning Bux et al. (2022), halal organizations have not only been required to deliver on micro halal aspects such as Syariah slaughtering to have complied at any slaughterhouse, prohibited meals and products to be consumed, non-halal certification for food premises that are selling alcohol and pork meat base but also to observe in sustainability necessities such as high-quality halal products and services, effective delivery time, standard working method compliance, environmental concerns and socio-economic responsibility. Currently, the commercial performance has acknowledged practical reflectiveness among halal producers but the halal organizational social and environmental performance are fairly functional in the halal industry (Rajeb et al., 2021). The halal organizational sustainability performance as stated by Suhartanto et al. (2020), stresses social and environmental aspects and embraces a number of items that are really hard to identify and measure. From the review, not so many articles and research in the halal field recognized a dimension scale to explore halal organizational sustainability performance based on social and environmental elements (Wardhana, 2020). Undertaking less attention on halal organizational social performance has become needed in the succession of a halal business nowadays (Fadhlur et al., 2018). Halal producers should take a cohesive line of approach with other halal stakeholders as well as halal suppliers for social benefits where they are operating (Zaid, 2020). The scenario becomes worse, when Malaysians tend to avoid working in the manufacturing sector (Shaharudin et al., 2018) due to selective occupation, education level and reluctant to do “infamous” work that they have and those opportunities as stated by Sthapit, Bjork and Piramanay (2023), are open to non-Malaysian and most of them never been trained or exposed in halal manufacturing at all.

In more drastic situations, halal manufacturers tend to hire workers with non-valid permits to work and refugees to work at their premises Suhartanto et al. (2020), due to cheap labour costs and fast delivery with ignorance of workers’ intake procedures. In the meanwhile, several matters have obstructed halal manufacturing in the Malaysian halal industry, mostly on halal products that has been produced by non-Muslim manufacturers. Disregard to comply with the Syariah standard among Malaysian halal manufacturers is still occurring (Husny et al., 2018). Jabatan Kemajuan Islam Malaysia (JAKIM) has enforced halal certification requirements for Malaysian halal manufacturers as one of the procedures for them to operate their business, but recklessness in manufacturing halal products seems like no conclusion (JAKIM, 2018). In the meantime, the degree to which Malaysian halal manufacturers are preparing to implement halal production is still unclear due to several issues in halal production that have still occurred particularly in product substance mixing and poor halal factory cleanliness and hygiene level (Mustafa & Mahyeddin, 2019). Therefore, it is necessary for future research to conduct in-depth analyses of halal production in Malaysia (Jia & Chaozi, 2021). According to Liu et al. (2021) there is no consensus about the influence of halal manufacturing on halal organizational sustainability performance results. Meanwhile, halal non-food products such as pharmaceuticals, nutraceuticals and cosmetics are part of businesses in the Malaysian halal industry as identified by Rahman et al. (2020), that cover the scope of halal manufacturing. Vaccination is one of the scientific research developments in the pharmaceutical industry (Mega, 2019). Vaccine contents, as verified by Noorazlina et al. (2021), have been argued as uncertainties and doubtful among Muslim consumers that have a high possibility of mixing with non-halal substances such as pork gelatine, monkey tissues and so on. Moreover, this study is taken to establish facts about halal manufacturing, which may improve the halal organizational sustainability performance of halal producers in the Malaysian halal industry. The effective application of halal manufacturing entails the development of strategic significance to implement sustainability performance. The study results will counsel managers on how to apply halal manufacturing to improve halal organizational sustainability performance. The results will support Malaysian halal producers in detecting operational pointers of halal manufacturing that contribute to halal organizational sustainability performance.

Additionally, the combination of possible constructs in the proposed study framework is anticipated to aid managers in understanding halal organizational sustainability performance significances throughout their halal manufacturing practice with the concept of sustainability. The earlier discussions have impelled several questions: (i) What encounters do halal producers aspect when practicing the complete range of halal manufacturing activities with sustainability concept? (ii) What character do halal producers perform in nurturing halal manufacturing activities with sustainability concepts? (iii) Can halal producers develop in leading to a diversity of halal manufacturing practices to achieve halal organizational sustainability performance? Next, this research moves a pace more by presenting a theoretical framework on the halal producer, directing to boost halal organizational sustainability performance results over the execution of halal manufacturing. Additionally, it is anticipated that halal producers will exert over dealing with halal manufacturing to improve extra sustainability value creation of halal products by implementing halal organizational sustainability performance. Halal practices contemplate a solid theoretical foundation, which may hinder an in-depth knowledge of this complex business scenario. Using the theoretical foundation of Institutional Theory (IT), this study offers a fresh input into halal practices. This theory may have developed comprehension and a complete concept that may improve the theoretical justification for the existing study’s links between variables. Therefore, this study intends to accomplish the necessity of understanding and empirically testing the practicality of halal manufacturing and its impact on halal organizational sustainability performance among Malaysian halal producers.

LITERATURE REVIEW

This section employed the narrative literature review method to investigate how halal manufacturing practices affected halal organizational sustainability performance in Malaysia’s halal industry. A narrative review varies from a systematic review by definition and only offers a concentrated sample of the relevant literature; even so, it encourages discussion and fosters a deeper understanding of the topic. The SCOPUS database and the Google Scholar search engine were searched using various title keyword combinations. Additionally, the timeframe was expanded to include publications from 2014 to 2024 that are more recent. More than 100 article abstracts were examined, and articles related to the halal industry were chosen. The critical dimensions of halal practices are identified for further analysis. been defined as rapid, comprehensive, profitable, and productive growth that enhances the welfare or interests of halal stakeholders, i.e., owners, employees, and the government.

In this study, the halal sustainability organizational performance of a will be examined. Halal producers enlist manufacturing firms in the halal market to carry out manufacturing tasks related to the production, packaging, fabrication, and installation of halal products for the benefit of halal consumers. The duties carried out by the HM might also extend to halal non-food products as well as halal food products (Husin, Kamarudin & Rizal, 2021). The purpose as proposed by Damit et al. (2018) that halal businesses must focus also on non-Muslim consumers who tend to ingrain halal products as the source of increasing demand instead of focusing on the conventional perception of Muslim consumers only. Conferring to Tieman and Darun (2017), are among the researchers who perceptibly established specific halal manufacturing propositions a various manufacturing methods that intend to improve organizational performance by enhancing production times, innovation and technology-driven, employee protection and machinery and equipment upgrading. Halal manufacturing is developed from good manufacturing practices as a study on the concept of manufacture and delivery just within time (JIT), high-quality products and sustainable manufacturing are broadly experienced in good manufacturing for better organizational performance(Hasmaizan & Salina, 2017).

In the intervening time, as mentioned by Norazlina et al. (2021), halal performance is significantly impacted directly by manufacturing quality standards and halal regulatory requirements that must be complied with by halal organizations. The combination of excellent manufacturing and a proper management plan is important for dynamic strategies to achieve organizational performance (Suhartanto et al. 2020). In the same way, Tan et al. (2017), demonstrated an advantageous direct relationship between strategic business transformation, entire business quality standard and business continuous improvement as elements of good manufacturing to attempt for organizational performance. In the meanwhile, Varinli, Erdem and Avcılar (2016), exposed the relationship between the best manufacturing on purchase intention of halal products that reflects on organizational financial performance. Additionally, Mega (2019), hypothesized that manufacturing processes based on halal product requirements have the most effect on the performance of organizations financially and non-financial impact. Further comprehensible research was quoted by Jafar et al. (2022), that halal manufacturing knowledge which complies with halal manufacturing standards has a positive and strong relationship with organizational performance. Hence, based on the literature review, this study aims to complete the prerequisite of research thoughtful by empirical observation on the sensibleness among Malaysian halal producers on the relationship in between halal manufacturing and halal organizational sustainability performance.

Halal Organizational Sustainability Performance

Halal organizational sustainability performance narrates the halal producer’s capability to manage the costs of operating that are interrelated with halal materials procurement, halal energy utilization, halal waste handling and zero-defect accidents during plant operations (Azam & Abdullah). Halal producers are emphasized to improve their sustainability performance for them to be resilient in the halal industry. Halal producers these days are facing more challenges with sustainable manufacturing at the production level, procurement level and marketing level and then focusing on the fluctuating demands from halal consumers that are now alarmed with the aspects of purity, health, safety, security, hygiene and green products and services (Norazlina et al., 2021).

Subsequently, halal producers must identify and foster halal manufacturing in sustainable adaptation as an effort to enhance organizational performance from the perspective of sustainability (Tan, Gligor & Ngah, 2022). Besides that, Zainal et al. (2021), stated that a strategic organization sustainable goal is possible to be achieved through resource empowerment and constant excessive organization sustainable development activities. In the meantime, Wel, Ashari and Ismail (2022) stated that implementation in terms of the detailed action sustainable plan, secure sustainable agreement on all elements and arranging for sustainable process monitoring and evaluation are important elements to be pondered to ensure the organization’s sustainability vision is achieved. Additionally, Zainol et al. (2021), quantified that halal manufacturing sustainable development covers many activities on labour sustainable productivity, sustainable quality of the halal products, environmental adoption at the workplace, environmental waste and residual management, air pollution management is vital for halal organizational sustainability performance implementation that benefits not just for halal producers but also for all halal stakeholders within the organization.

Sustainable development is the main element for an organization to be achieved with the enhancement of fair trade, ethical business, and environmental stewardship and those approaches are still far lagging among Malaysian halal producers due to several issues are still occurring like air pollution and plant gas emission. According to Husin, Kamarudin and Rizal (2021), how it is important to develop, select strategies and establish agreement toward the sustainable organization’s primary objective in the halal manufacturing area. The cutting-edge focus of the intersection of halal sustainability dimensions, where all variables benefit from each other regulated for better organizational performance. This standpoint links with Suhartanto et al. (2020), in a halal sustainability study, where they posit that halal sustainability should not be restricted to commercial profitability solely, but must encirclement the impacts of social obligation and environmental preservation elements. In the meanwhile, when interconnecting ranges of social and environmental with the neglection of economic performance it can be inflated to the halal producers since these proportions do continually tie with economic reflections. According to Bux et al. (2022) the intersecting areas of economic, social and environmental variables do cost increment to the halal business, but not optimally, since there is more risk to the halal business than when all three dimensions intersect and sustainability has thrived. Despite the fact that the profiteering aspect of the sustainability concept is extensively applied in halal research, social and environmental paradigms are less documented and much more challenging to constrain (Jafar et al., 2022).

Halal Manufacturing

Halal manufacturing is developed from good manufacturing practices as a study on the concept of just-in-time (JIT), high-quality products to be produced are broadly experienced in decent manufacturing for better performance. In the meantime, quality practices publicized a significant direct impact on operational performance. Mega (2019) discovered the relationship between halal manufacturing performance and business viable plans. Similarly, Suhartanto et al. (2020), also offered a positive direct effect between quality practices and halal strategic manufacturing. Meanwhile, Husny et al. (2018), found an indication that halal goods manufacturing exposed an important effect on financial performance. Meantime, Hasmaizan and Salina (2017), instituted that halal manufacturing significantly and positively influences organizational performance. Other reliable research was conducted by Fadhlur et al. (2018), which disclosed that halal manufacturing capability has a positive and strong relationship with organizational performance. Halal producers conscript manufacturing firms in the halal industry to transmit out manufacturing tasks related to the production, packaging, fabrication, and installation of halal products for the benefit of halal consumers. The obligations passed out by the halal producers might also spread to halal non-food products as well as halal food products (Jia & Chaozhi 2021). In addition, Husny et al. (2018), are among the scholars who have verified a specific halal producer proposition as a halal production strategy that proposes to accomplish fineness in halal manufacturing by plummeting set-up times, technology submission, member of staff security, halal manufacturing procedure and sound preventive maintenance for workers earring protection. The halal manufacturing integrated system’s purpose is to ensure the quality and perspicacity that halal products are clean, hygienic, safe, secure and Syariah compliance (Ibrahim & Aghwan, 2022).

Halal producer practices in halal manufacturing as stated by Mostafa (2020) include specific product design, product assembly, order processing, inventory restocking, order picking, order fulfilment, product returns, labelling and packaging, accurate measures, lead time production and managing excess resources. Those practices are required to be aligned with the categorization of Syariah manufacturing standards that halal producers are linking such as halal raw food manufacturing, halal process food manufacturing, halal cosmetic manufacturing, halal pharmaceutical manufacturing, and halal leather manufacturing. On the other hand, several intangible practices must be inculcated in halal manufacturing by halal producers and it covers intellectual business performance, human resource capacity, a crucial role for the quality assurance division, a training and development program, the development of human capital, quality data and reporting, vendor development management, competent services, process control and procedure and project planning (Bashir et al., 2019).  In addition, IT provides a theoretical foundation to explain how halal manufacturing will result in successful halal organizational sustainability performance. When good practice of halal manufacturing as stated by Azam and Abdullah (2020) receives support from the halal producer supervision to safeguard the organizational performance. The level of halal manufacturing success is possible to support organizational performance (Talib 2020).

DEVELOPMENT OF THEORETICAL FRAMEWORK

Being among the main Malaysian economic contributors empowers halal producers to operate fully accountable and productively when dispensing halal products by halal manufacturing implementation towards halal organizational sustainability performance. Currently, halal producers simplify a whole process, serve as the head of the entire halal product manufacturing management process and speed up the best manufacturing practices. To maintain the advancement of the theoretical framework, institutional theory has been conjectured in this study. Concerning Meyer and Rowan, (1977) and DiMaggio and Powell, (1983), this study affirms the normative isomorphism of IT. In practice, the theory derives halal producers to be functioning as institutionalized business structures that are motivated to implement halal organizational sustainability performance while conducting halal manufacturing business. In halal research, halal producers create a halal manufacturing brand identity and brand image. Halal consumers interpret halal manufacturing as an indication that points out halal products are manufactured with elements of hygiene, safety, security, and consistency (Tan, Gligor & Ngah, 2020). As halal manufacturing portrays positive impacts on the halal producer, it will reflect halal consumers’ confidence level in halal products that are produced by halal producers (Tieman & Darun, 2017).

As an outcome, halal producers will be able to manufacture halal products and constantly enhance value by providing characteristics that will help consumers of halal products elect the correct halal products. In due course, halal producers’ function will progress from providing restricted production through outsourcing to complete manufacturing in a cooperative effort to enhance the calibre and perception of halal products as being safer, more hygienic, cleaner and compliant with Syariah regulation (Tan et al., 2017). As the process of sustainable waste transfer, and sustainable handling of non-consumable and consumable raw materials while preventing sustainable cross-contamination between halal and non-halal materials throughout manufacturing operations, it is recommended that halal producers initiate sustainable manufacturing practices to support halal sustainable performance (Zaroni & Musari, 2020). When describing the impact of IT, halal producers will be bright to offer more halal quality products with complete halal sustainable package production by demonstrating the impact of IT in halal business practices through wider collaboration with halal sustainable manufacturing suppliers, which will ultimately increase the halal organizational sustainability performance.

In view of the preceding discussions, Figure 1 illustrates the proposed theoretical framework of the study:

Figure 1: Proposed theoretical framework

The proposed conceptual model in Figure 1 illustrates the sequence of relationships between Halal manufacturing and Halal organizational sustainability performance. Specifically, it shows how Halal manufacturing influences organizational sustainability performance, resulting in reputational, financial, and competitive benefits. Nevertheless, sustainability performance is a critical factor in determining the success of the Halal sector. By adopting the concept of sustainability, organizations can improve their performance and increase the demand for Halal products.

With orientation to the suggested theoretical framework, Halal producers is likely to support Halal manufacturing and Halal organizational sustainability performance actions if they are reliable in taking on the continuous as among main Malaysian economic contributors. In the end, this could lead to an effort to upsurge sustainable halal manufacturing, which could provide optimum sustainable cost management, enhanced halal consumer sustainable experience and protection of halal products for halal sustainable method. As a systematic economic part, the halal producer is anticipated to experience a dainty sustainable planning obstacle and present insufficient halal sustainable production and service in the current sustainable strategic operations. Therefore, the halal producer is suggested to come across any matters and stay intact by providing sustainable halal manufacturing towards halal organizational performance.

Proposition Development

Many researches converging on manufacturing organizational performance and from Likewise, Jaafar (2024), proved that quality significantly positively affects business performance. Meanwhile, Husny et al. (2018), presented a significant relationship between quality implementation and business performance. In the meantime, Wel, Ashari and Ismail (2022), discovered the relationship between halal logo and halal certification in halal manufacturing as a source of sustainable enactment and business competitive strategy. Correspondingly, Jia and Chao Zhi (2021), presented an important manufacturing supplier on quality practices and competitive advantage in the halal food industry. A study on the concept of just-in-time (JIT) advocated that JIT is an extensive practice in good manufacturing for better performance and is functional to be applied sustainable approach in halal manufacturing (Zainal et al., 2021).

The relationship between halal manufacturing and halal organizational sustainability performance in this study is linked thru the lens of institutional theory by Meyer and Rowan, (1977) and DiMaggio and Powell, (1983). It is helpful to explore manufacturing activities executed to designate the firms’ acceptance and practice of technology systems via normative pressure. Above and beyond, it is proposed that normative pressure is dynamically motivated by halal producers (Mohamed, Hamid & Thoo, 2015). Moreover, Kasri et al. (2021) suggested that quality practices in halal pharmaceuticals significantly directly impact manufacturing performance. Conferring to Nadzirah et al. (2020), identified that decent halal manufacturing impact on the halal economy performance. Meantime, Maizaitulaidwati, Suzilawati and Adriana (2021), found that competitive halal manufacturing practices are linked with halal logistics among small and medium enterprises towards organizational performance. Another consistent research was by Ahmedov (2020), who divulged good manufacturing capability has a positive and strong relationship with organizational performance.

In the context of this study, research posits that halal manufacturing is industrialized to improve halal organizational sustainability performance. Quality increment, productivity, efficiency, effectiveness and agility as an implementation of halal manufacturing are expected to increase halal organizational sustainability performance (Tan, Gligor & Ngah 2022). Conversely, if an interest towards halal practices such as halal manufacturing, halal logistics, halal purchasing, halal retailing, halal integrity and halal regulations is low this will result in lower strategic halal organizational sustainability performance (Bux et al., 2022). Compatibly, Zainol et al. (2020), studied halal brand labels in halal food manufacturing and is likely to result in the increment of consumer purchase intention drives a higher success rate of halal organizational performance towards sustainability.

Additionally, IT provides a theoretical foundation to explain on how sustainable halal manufacturing willpower on effective halal organizational sustainability performance. When the sustainable practice of halal manufacturing as stated by Azam and Abdullah (2020), obtains sustenance from the halal organization management the sense of commitment is trailed to safeguard the halal organizational sustainability performance practice. The level of sustainable halal manufacturing accomplishment is conceivable to provision the halal organizational sustainability performance activities (Talib, 2020). Hence, by given the literature above and traversing with the lens of the eye of IT, research conjectures that there is a positive relationship between halal manufacturing and halal organizational sustainability performance, the proposition is proposed as follows:

Proposition 1: The HM practices affect the HOSP.

CONCLUSION

Overall, the suggested theoretical framework in this study recommends a different way for Malaysian halal producers to explore a forte of sustainable halal manufacturing services towards halal organizational sustainability performance. The hypothesis is also anticipated by the study to clarify how Malaysian halal producers as one of the main country economic contributors to the practice of sustainable halal manufacturing would affect the halal organizational sustainability performance. Tentatively, IT in this study enlightens how Malaysian halal producers circulated their resources to implement sustainable halal manufacturing, leading to successful halal organizational sustainability performance. in the lens of IT, Malaysian halal producer’s assortment of organizational resources with practicality, described by partaking sustainable halal market, a more solid sustainable competitive edge and a dedicated sustainable halal consumer base that in due course lifts their profiteering. It is recommended that future research explore the other halal best practices for overall Malaysian halal producer proficiency while offering sustainable halal manufacturing towards halal organizational sustainability performance.

ACKNOWLEDGEMENTS

This work was funded by Universiti Teknologi MARA (UiTM), Shah Alam, Selangor, Malaysia, under the Geran Insentif Penyeliaan (GIP) with reference number 600-RMC/GIP 5/3 (090/2023).

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