Social auditing - a tool for testing RDP commitment

23 February 1998

The days of corporate glossies and charitable cheques sufficing as social responsibility are numbered. Finally, there is a credible methodology for assessing the "stakeholder performance" of companies. Its name - social auditing. In the future, this will be a key way of measuring the real commitment of South Africa's private sector to reconstruction and development.

So what is social auditing? According to the New Economics Foundation (NEF) in London, who pioneered the technique, social auditing (or more fully, social and ethical accounting, auditing and reporting) assesses the social impact of an organisation, relative to its own aims, and those of its stakeholders. Stakeholders are defined as those people who affect or are affected by the activities of the organisation. These may include, for example, customers, employees, communities, suppliers and the environment.

Why would a company wish to perform such an exercise? Any number of reasons really: more conscious customers, demanding demonstration of social responsibility; pressure from NGOs for more transparency and accountability, especially in reporting of non-financial performance; increasing government requirements for good governance (such as the recommendations of the King Report in South Africa); a more critical public which doubts the credibility of companies' claims of caring about anything other than profits.

How is a social audit performed? Because it is based on financial auditing techniques, it must have similar characteristics. It must be repeatable, comparable, independently undertaken, systematic, representative in content, and the findings publicly disclosed. The stages of the process, according to local practitioners Just Exchange, are to:

• Identify stakeholders and their values or aims;
• Identify indicators and targets of performance in relation to these values;
• Design the method for assessing performance against indicators and targets (e.g. using survey questionnaires, focus groups, etc.);
• Carry out the assessment;
• Prepare "social accounts";
• Verify social accounts by an auditor or audit group;
• Distribute social audit to stakeholders.

An increasing number of organisations have undergone social audits as a way of assessing the impact and performance of their organisation beyond the financial bottom line. Organisations that NEF are currently working or have recently worked with in this field include: Traidcraft plc (UK), Shared Earth (UK), The Body Shop International, Ben and Jerry's (USA), Co-operative Retail Services (UK). NEF have also subjected themselves to a social audit.

According to NEF, a social review is different from a full social audit as there is no formal external verification and limited disclosure to stakeholders. It involves building an understanding of the key performance issues, the existing information systems and capacity and how this can be developed, as well as defining what boundaries the initial practice of social auditing could have. Recent work on this level includes: Hollard Insurance (SA), SustainAbility Ltd. (UK) and the Co-operative Wholesale Society (UK).

In order to ensure professional and consistent standards are applied in this newly emerging field, the Institute of Social and Ethical Accountability has been established internationally. South Africa is also currently establishing the Institute for Social and Ethical Auditing in Southern Africa (Iseasa), with founding members including auditors KPMG, Just Exchange, Letsema Consulting and the Development Resources Centre.

So much for the background and the theory. Still a bit vague? Next time, we'll take a look at practical examples of what the pioneers in social auditing are doing about their "triple bottom line".