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Overview of Social Auditing

815 Broadview Ave, Suite A Toronto, Ontario, M4K 2P8T: 416-465-1972 F: 416-465-0271

www.interpraxis.com

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Historical Roots

To casual observer social auditing is a newphenomenon.

In reality, the concept of a social audit was formedmuch earlier in the 1940s when a depression eraacademic Theodore Kreps called on companies toacknowledge their responsibilities to citizens.

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Historical Roots

1960-70s a fresh wave of interest in social andethical accounting, auditing and reporting (SEAAR).

Concept of stakeholders emerges and organizationslike the US Chamber of Commerce make the linkbetween improvements in corporate socialperformance and long term profitability.

While most of the early theorizing about SocialAuditing came from the US, most of the practicalexperimentation took place in Europe.

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What is Social Auditing ?

SA is a management tool and accountabilitymechanism which can enhance an organizationscapacity to:

Evaluate their impact on stakeholders

Determine how well they are living up to thevalues they espouse.

Improve their strategic planning process by

identifying potential problems before they comeup; and

Increase their accountability to the groups theyserve and depend on.

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Social & Ethical AAR

SEARR involves accounting for, reporting on, andauditing an organizations policies, procedures andimpacts with respect to employees, communities (local

and global), suppliers, customers and the environment.

This can involve disclosure regarding, interaliacommitments to workplace conditions, fairness and

honesty in dealing with suppliers, customer servicestandards, community and charitable involvement andnon-exploitive business practices in developingcountries

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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 & EthicalAccountAbility) specifies principles andprocesses to be followed in order to secure thequality of SEAAR

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6 Elements of Social Audit

Multi-perspective

Comparative Comprehensive

Regular

Verification Disclosure

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8 Steps in conducting SA

Assemble organization and secure agreement andcommitment.

Define and prioritize the organizations objectives andestablish the action it intends to perform to meet them.

Identify the organizations stakeholders

Agree upon indicators, information, benchmarks andtargets.

Data gathering systems put in place.

Collating, analyzing and interpreting results

External verification process

Disclosure and act on results

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Why Social Audits ?

To permit the enterprise to effectively monitorperformance.

To permit the stakeholders in the enterprise affectits behaviour.

To allow enterprise to report on its achievementsbased 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 valueswhich it set out to achieve.

- Pearce (1996)

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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)

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Potential Issues

SA has excellent promise as a management toolbut some potential problems remain:

Reporting organization can deliberately limit audit scope in order to avoidcontroversies.

Process can be managed internally to the disadvantage of some externalstakeholders.

Some significant stakeholders may be omitted.

Organization may use arbitrary or inappropriate indicators to evaluateoutcomes.

The standards, independence and honesty of the auditor may be open toquestion.

Therefore the need for Generally Accepted Assurance Standard (AA1000)

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Social Audits: Conclusion

Social auditing is a process of measuring andreporting, in order to understand and ultimately

improve, an organizations social performance.Mission Related

Managerial Issues Accountability Issues

Benefits

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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

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Thank You !

815 Broadview Ave, Suite AToronto, Ontario, M4K 2P8

T: 416-465-1972 F: 416-465-0271www.interpraxis.com

http://www.interpraxis.com/http://www.interpraxis.com/