Overview of Social

Auditing

Historical Roots
To casual observer social auditing is a new
phenomenon.
In reality, the concept of a social audit was
formed much earlier in the 1940s when a
depression era academic Theodore Kreps
called on companies to acknowledge their
responsibilities to citizens.

Historical Roots
1960-70s a fresh wave of interest in social and
ethical accounting, auditing and reporting (SEAAR).
Concept of stakeholders emerges and
organizations like the US Chamber of Commerce
make the link between improvements in corporate
social performance and long term profitability.
While most of the early theorizing about Social
Auditing came from the US, most of the practical
experimentation took place in Europe.

What is Social Auditing ?

SA is a management tool and accountability
mechanism which can enhance an
organizations capacity to:

Evaluate their impact on stakeholders

Determine how well they are living up to the
values they espouse.
Improve their strategic planning process by
identifying potential problems before they
come up; and
Increase their accountability to the groups
they serve and depend on.

Social & Ethical AAR

SEARR involves accounting for, reporting on, and
auditing an organizations policies, procedures and
impacts with respect to employees, communities
(local and global), suppliers, customers and the
environment.
This can involve disclosure regarding, interalia
commitments to workplace conditions, fairness
and honesty in dealing with suppliers, customer
service standards, community and charitable
involvement and non-exploitive business practices
in developing countries

SEAAR Principles &

Standards

SA 8000 (Council on Economic Priorities)

encouraging enlightened
labour/management practices in 3rd world.
Global Reporting Initiative (GRI)
sustainability reporting guidelines
AA1000 (Institute of Social & Ethical
AccountAbility) specifies principles and
processes to be followed in order to secure
the quality of SEAAR

6 Elements of Social Audit

Multi-perspective
Comparative
Comprehensive
Regular
Verification
Disclosure

8 Steps in conducting SA

Assemble organization and secure agreement and

commitment.
Define and prioritize the organizations objectives and
establish the action it intends to perform to meet them.
Identify the organizations stakeholders
Agree upon indicators, information, benchmarks and
targets.
Data gathering systems put in place.
Collating, analyzing and interpreting results
External verification process
Disclosure and act on results

Why Social Audits ?

To permit the enterprise to effectively monitor

performance.
To permit the stakeholders in the enterprise
affect its behaviour.
To allow enterprise to report on its achievements
based on verified evidence rather than on
anecdote and unsubstantiated claims.
Permits those who invest in the enterprise and its
stakeholders to judge if it is achieving the values
which it set out to achieve.
- Pearce (1996)

6 Reasons to conduct a SA

Know what is happening

Understand what people think and want
Tell people what you are achieving
Strengthen loyalty / commitment
Enhance decision-making
Improve overall performance
- Zadek (1998)

Potential Issues
SA has excellent promise as a management
tool but some potential problems remain:

Reporting organization can deliberately limit audit scope in

order to avoid controversies.
Process can be managed internally to the disadvantage of some
external stakeholders.
Some significant stakeholders may be omitted.
Organization may use arbitrary or inappropriate indicators to
evaluate outcomes.
The standards, independence and honesty of the auditor may
be open to question.

Social Audits: Conclusion

Social auditing is a process of measuring
and reporting, in order to understand and
ultimately improve, an organizations
social performance.
Mission Related

Benefits
Managerial Issues

Accountability Issues

Review of Benefits:

Quality Management.
Recruitment and Retention of Employees.
Promote Genuine Partnerships w/ Suppliers.
Risk Management.
Better Governance.
Improved Accountability.
Member / Stakeholder Engagement.
Increased Investor Trust.
Brand Equity

Thank You !