Assignment – Social Accounting
What is Social Accounting?
“Social accounting and auditing is about understanding the impact of organisations on our society and the overarching context is sustainability: both sustainability of the organisation itself (the interrelation of the social, the environmental, the cultural and the financial) and sustainability of behaviour which contributes to a future for the people and the planet. Social accounting is distinct from evaluation in that it is an internally generated process whereby the organisation itself shapes the social accounting process according to its stated objectives. In particular it aims to involve all stakeholders in the process. It measures social and environmental performance in order to achieve improvement as well as to report accurately on what has been done.
Each sector and each particular organisation will have its own reasons for looking to account for their social performance. Some reasons reported by organisations include the following; acting sustainably, ‘walking their talk’, improving social and environmental performance, being more accountable, attracting additional funds, becoming more economically viable, being a leader in the field, attracting a wider market, a public relations tool, meeting objectives, working within a framework and improving reporting ability. An additional factor that applies to the ‘for profit’ sector is that of mandatory social reporting. In some countries social reporting is a legal requirement. For instance, in France companies with over 300 employees are required to produce a social report. In the UK a regulation on Pension Funds “requires trustees to state the extent to which they have taken environmental and ethical considerations into account in fund management” (New Economics Foundation 2000). There are initial signs in Australia that mandatory requirements may also drive greater social accounting and reporting here. The Financial Services Reform Act 2001 requires a Product Disclosure Statement (PDS) for financial products that have an investment component. This includes superannuation products, managed investment products and life insurance products. The PDS has to include a statement on “…the extent to which labour standards or environmental, social or ethical considerations are taken into account in the selection, retention or realisation of the investment” (Birch 2001).
Scope of Social Accounting:
Social Accounting and Audit allows a co-operative or social enterprise to build on its existing monitoring, documentation and reporting systems to develop a process whereby it can account fully for its social, environmental and economic impacts, report on its performance 1|Page
Assignment – Social Accounting
and draw up an action plan to improve on that performance. Through the social accounting and audit process an organisation can understand its impact on the surrounding community and on its beneficiaries and build accountability by engaging with its key stakeholders. In this way it can prove its value and improve its performance. Basically, social accounting involves clarifying what a co-operative or social enterprise does, what it is trying to achieve and who it is working with. Then, on the basis of this, it collects quantitative and qualitative information and data which relates to its overall objectives and underlying values. This usually lasts one year and runs concurrent with the financial year. At the end of the social accounting year the organisation brings all the information together in the form of social accounts that are independently audited and after revisions the social accounts form a Social Report.
Social accounting models need to share fundamental principles (Pearce 2001).i The overarching principle is to achieve continual improvement in performance relative to the organisation’s social impacts, chosen social objectives and stated values. Other principles include: •...
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