Overview of Social Auditing 815 Broadview Ave, Suite ‘A’ Toronto, Ontario, M4K 2P8 T: 416-465-1972 F: 416-465-0271 www.interpraxis.com

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 1940’s when a depression era academic Theodore Kreps called on companies to acknowledge their responsibilities to citizens.

Historical Roots 1960-70’s – 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 organization’s 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 organization’s objectives and establish the action it intends to perform to meet them. Identify the organization’s “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)

Therefore the need for Generally Accepted Assurance Standard (AA1000) 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. Therefore the need for Generally Accepted Assurance Standard (AA1000)

Social Audits: Conclusion Social auditing is “a process of measuring and reporting, in order to understand and ultimately improve, an organization’s 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

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