Meaning : Social audit may be defined as systematic assessment of the social impact of the activities of a business firm. It is a critical examination of the activities of a company in order to measure, evalua5te and report their impact on the immediate social environment. Social audit is a comprehensive evaluation of the way a company discharges its responsibilities to different stakeholders. It is an approach for measuring, monitoring and appraising the social performance of a business enterprise. It refers to the assessment or evaluation of a company’s performance in the areas of social responsibility. According to Howard R. Bowen, “social audit is a commitment to systematic assessment of and reporting on some meaningful, definable domain of a company’s activities that have social impact. Social audit encompasses all activities of a firm which have a social impact. Both quantitative and qualitative data are used in social audit. It determines what an enterprise is outside consultants or both. The person responsible for conduction social audit must be (a) oriented towards the social point of view, (b) conversant with business practices and problems, and (c) technically trained in such fields as law, economics, sociology, philosophy, theology, etc.
Social audit involves:
- Identification of the firm’s activities that have a potential social impact.
- Measurement of the social costs (inputs) and benefits (outputs) of such activities.
- Assessment and evaluation of these costs and benefits.
- Reporting the social performance of the firm.
Objectives of social Audi :
- To judge the social dimensions of company’s performance.
- To improve social performance of the company on the basis of the feedback provided by the social audit.
- To boost the public image of the company.
Benefits of Social Audit:
- Social audit helps to determine how well the enterprise is living up to its social objectives. It provides data for comparison with policies and standards.
- Social audit is helpful in creating greater concern for social obligations throughout the enterprise. In the course of social audit employees become more aware of the social impact of their actions.
- Social audit provides cost data on social programmes. Such data are useful in preparing the social budget of the enterprise.
- Social audit provides data for evaluating the effectiveness of social programmes.
- Social audit helps to improve the public image. Press and public come to know the social activities of the enterprise.
- Social audit reveals the areas where in the enterprise is vulnerable to public pressures and where in its strengths lie.
Approaches to Social Audit:
- Inventory Approach : Under this approach, a list of all the social activities undertaken by the company is prepared.
- Programme Management Approach : In this approach, a statement is made as to what extent the company met its objectives for each social activity.
- Outlay Approach : Under this approach, the amount spent on each social activity is reported.
- Cost Benefit Approach : In this approach the cost as well as benefit of each social activity is disclosed.
Obstacles to social audit :
- Social audit being a relatively new concept is yet to again wide acceptance.
- No generally accepted methodology is available for conducting social audit.
- There is lack of agreement as to the items to be included for social audit.
- It is not possible to measure social costs and benefits in quantities.
- Social audit involves time and efforts. Therefore, people in a company may resist it.
- There may be resistance due to fear of poor performance that may be revealed by social audit.
- Social results occur mainly outside an enterprise. It is difficult to collect data from outside sources.