Social Audit: Strategic Management and

Part- VIII : Current Corporate Issues
Ch-42: Social Audit
Chapter
42 Social Audit
Copyright © 2008, C Appa Rao, B Parathiswara Rao, K Sivaramakrishna
42– 1 C Appa Rao, B Parathiswara

Strategic Management and Business Policy Text and Cases Rao, K Sivaramakrishna
Excel Books
Ch-42: Social Audit
Introduction
 Social audit refers to the evaluation or assessment of a company’s
performance against planned goals in the area of social responsibility. It is a
way of measuring the extent to which a company’s actual performance
comes up to the social objectives set for itself.
 Society expects business to share the fruits of progress and growth. A

healthy business cannot exist in a sick, impoverished society.
 Social audit serves as a “calculus for gauging the firm’s socially oriented
activities.” It is a systematic assessment of a company’s activities in terms
of their social impact.

Excel Books
Ch-42: Social Audit
Definition Of Social Audit

 “Social audit represents a managerial effort to develop a calculus for
gauging the firm’s socially oriented activities. It is an attempt to measure,
monitor and evaluate the organization’s performance with respect to its
social programmes and social objectives.”
– Caroll and Bailer
 “Social audit is an attempt to identify, measure, evaluate, report on and
monitor the effects that the organization is having on its stakeholders and
society as a whole – information not covered in traditional financial reports.”
– Hellriegel, Jackson, Slocum
A social audit generally scores company performance in such areas as
employee benefits, plant safety, ecology, community involvement and customer
service.

Excel Books
Ch-42: Social Audit
Need For Social Audit

The need for social audit arises because of its usefulness for various
purposes:
1. Social audit may be used for monitoring and evaluating a firm’s corporate
social responsibility actions.
2. It helps the company to make sure that it is implementing CSR policy as
planned.
3. Social audits help company to make good on its CSR promises. CSR
actions by their nature are open to intense public scrutiny and hence involve
reputation of the company.
4. Managers can also use social audits
i. To scan the environment
ii. Determine firm vulnerability and
iii. Institutionalize CSR within the firm.

Excel Books
Ch-42: Social Audit
Approaches To Social Audit

The financial costs of social activities can be computed by any trained finance
manager, but the valuation of social costs and benefits is a difficult task for
corporate executives to undertake unless they are trained. A number of
approaches have been developed for Social Audit.
Cost Benefit Approach
Under this approach, the information obtained about the costs incurred in each
social activity is presented in the form of a social balance sheet.
Inventory Approach
This approach involves preparation of a list of social activities carried out by the
company.
Cont….

Excel Books
Ch-42: Social Audit
Outlay Approach
In this approach the amount spent on each social activity is disclosed. It

recognizes the costs involved and identifies ways to reduce such costs.
Programme Management Approach
In this approach, in addition to the above steps, a statement is made as to

whether the company realized its objectives for each social activity.

Excel Books
Ch-42: Social Audit
Scope And Objectives Of Social Audit

Social audit generally tries to cover the following areas:
1. Philosophy
2. Ethical issues
3. Equal opportunity
4. Environment
5. Quality of life
6. Human resources
7. Consumerism
8. Society
9. Finance
10. Environmental Protection Cont….

Excel Books
Ch-42: Social Audit
According to Helleriegel, growing water, air and environmental pollution by

various industries in recent times has led to a public outcry demanding
‘environmental protection’ at any cost. Responding to the call of
environmentalism, many industries have initiated the following steps:
1. Cut back environmentally unsafe operations.
2. Compensate for environmentally risky ventures.
3. Comply with government and anti-pollution regulations.
4. Promote new manufacturing technologies.
5. Recycle wastes.
A good social audit helps the company to identify, measure and monitor its
performance in the above areas, and make good any shortcomings in
discharging its social responsibilities.

Excel Books
Ch-42: Social Audit
Types Of Social Audit

There are different types of social audit. Some of the important types are
listed below:
1. Financial Statements Format Social Audit
2. Macro-Micro Social Indicator Audit
3. Socio Economic Operating Statement (SEOS)
4. Social Performance Audit
5. Social Process Audit
6. Partial Social Audit
7. Comprehensive Audit

Excel Books
Ch-42: Social Audit
Difficulties In Social Audit

Social audit presents many problems. Some of the critical problems or
difficulties are:
a) It is difficult to determine the precise scope of social audit. In other words, it

is difficult to decide which activities are to be treated “social” and which are
not.
b) It is difficult to accurately convert the requirements of various groups such

as shareholders, employees, customers, government, general public etc.
into social components.
c) It is also difficult to determine the exact “yardsticks” for measuring the

“costs” or “benefits” of social activities.

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Part- VIII : Current Corporate Issues

Ch-42: Social Audit

Copyright © 2008, C Appa Rao, B Parathiswara Rao, K Sivaramakrishna

42– 1 C Appa Rao, B Parathiswara

 Society expects business to share the fruits of progress and growth. A

Copyright © 2008, C Appa Rao, B Parathiswara Rao, K Sivaramakrishna

42– 2 C Appa Rao, B Parathiswara

Definition Of Social Audit

42– 3 C Appa Rao, B Parathiswara

Need For Social Audit

42– 4 C Appa Rao, B Parathiswara

Approaches To Social Audit

Cost Benefit Approach

Copyright © 2008, C Appa Rao, B Parathiswara Rao, K Sivaramakrishna

42– 5 C Appa Rao, B Parathiswara

In this approach the amount spent on each social activity is disclosed. It

Programme Management Approach

In this approach, in addition to the above steps, a statement is made as to

Copyright © 2008, C Appa Rao, B Parathiswara Rao, K Sivaramakrishna

42– 6 C Appa Rao, B Parathiswara

Scope And Objectives Of Social Audit

Copyright © 2008, C Appa Rao, B Parathiswara Rao, K Sivaramakrishna

42– 7 C Appa Rao, B Parathiswara

According to Helleriegel, growing water, air and environmental pollution by

1. Cut back environmentally unsafe operations.

2. Compensate for environmentally risky ventures.

3. Comply with government and anti-pollution regulations.

4. Promote new manufacturing technologies.

42– 8 C Appa Rao, B Parathiswara

Types Of Social Audit

1. Financial Statements Format Social Audit

2. Macro-Micro Social Indicator Audit

3. Socio Economic Operating Statement (SEOS)

4. Social Performance Audit

5. Social Process Audit

6. Partial Social Audit

42– 9 C Appa Rao, B Parathiswara

Difficulties In Social Audit

a) It is difficult to determine the precise scope of social audit. In other words, it

b) It is difficult to accurately convert the requirements of various groups such

c) It is also difficult to determine the exact “yardsticks” for measuring the

Copyright © 2008, C Appa Rao, B Parathiswara Rao, K Sivaramakrishna

42– 10 C Appa Rao, B Parathiswara

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