Corporate Social Responsibility and Social Audit Standards
Social Responsibility of Business
The growth of large corporations with their professional managers has changed the nature of society through its effect on competitive forces and the ownership of private property. With the increase of power in society, they are forced to concern themselves with the nature of social responsibilities. Management must take decisions involving moral issues and must adapt itself to the social forces that affect it. The idea of social responsibility of business is based upon the concept that business is something more than a purely economic institution. Public enterprises operate within the precincts of society. While the immediate society where it operates provides its environment, material, manpower, and market, the business must remain accountable to it.
Social Responsibility Strategies
In view of the ongoing controversy regarding whether or not a business has social responsibility, it is not surprising to find a wide range of industry responses to the issue. Business responses to social responsibility tend to fall within four categories:
- Social opposition
- Social obligation
- Social response
- Social contribution
These positions fall along a continuum, ranging from low to high levels of socially responsible behavior.
Characteristics of Socially Responsible Firms
- Initially founded by far-sighted people who visibly set the firm’s moral tone.
- Stuck to the basics and produced only high-quality goods and services for specific market niches.
- Developed a public image that emphasized a commitment to quality and often used non-traditional means to promote it.
- Firmly practiced the dual principles of self-management and decentralization.
- Brought in outside people to provide needed talent and additional perspectives.
Social Audit and CSR in Public Sector Units
Social audit has been variously defined. As it happens with any new management technique, there is not yet any definition which has gained universal acceptance. Bauer and Fenn define social audit as “a commitment to systematic assessment of and reporting of some meaningful definable domain of a company’s activities that have social impact.” The authors’ emphasis is on the assessment and reporting of corporate social programs.
Dilley defines the social audit as an “investigation of an enterprise’s performance as a member of the community in which it has its primary impact.” Such investigations consist of the preparation of an inventory of the socially relevant activities of the enterprise, quantification (to the extent possible) of the social costs and benefits resulting from those activities, and the compilation of other quantitative information providing insight into the social performance of the enterprise (Hindu Business Line, 1997).
Key Features of Social Audit
- The areas for social audit include any activity which has a significant social impact, such as activities affecting environmental quality, consumerism, and opportunities for women or other disadvantaged people.
- Social audit determines what an organization is doing in social areas, rather than the absolute amount of social good that results. It is a process audit rather than an audit for results.
- Social performance is difficult to audit because most results occur beyond the company’s gate, and the company has no means of securing data on the results. Even if data are available, it is difficult to establish how many of them have occurred due to specific corporate initiatives.
Social Audit Implementation in India
In India, TISCO was the first company to set up a Social Audit Committee for conducting a social audit of its work under the chairmanship of Justice S.P. Kotwal, with Prof. Rajini Kothari and Prof. P.G. Mavalankar as members. This committee was tasked with examining and reporting the extent to which TISCO fulfilled its social and moral responsibilities to:
- Financial institutions and creditors: Interested in financial position, fund-flow, and debt-paying capacity.
- Shareholders, academic institutions, and consultants: Interested in the utilization of resources.
- Environmentalists: Interested in air and water pollution, ecological imbalances, and resource conservation.
Global Guidelines for CSR Practice
The global impetus that CSR has received in recent years has oriented companies to invest socially and evolve a profit-oriented welfare approach. Besides legal provisions, several initiatives reflect how companies are investing responsibly to improve their brand image while addressing socioeconomic issues. Comprehensive guidance for companies is available in the form of several globally recognized frameworks and tools.
The United Nations guiding principles on business and human rights are grounded in the recognition of states’ obligations to fulfill human rights and the role of business enterprises to perform specialized functions, ensuring rights and obligations are matched to effective remedies (United Nations, 2011).