Social Audit: Definition, Importance, Benefits, Limitations

By | Januari 7, 2022

What it is: A social audit is a formal and systematic examination of corporate social responsibility. It examines and focuses on the company’s impact on society and reviews related company practices and policies. It is important to know how responsible the company is to its social environment and how well the company is achieving its social responsibility goals.

Social audits may include environmental audits and some other aspects of the business such as occupational health and safety, employee benefit schemes, contributions to local community events and charities, and protection of customer privacy. It requires companies to identify who their stakeholders are, what they want to achieve, and how they measure performance.

What is the importance of social audit?

External demands on companies to prioritize not only profit, but also social and environmental aspects. Various campaigns by pressure groups are forcing businesses to balance the three. On the other hand, governments in various countries have also adopted stricter policies and regulations on social responsibility and good corporate governance. 

Such trends force companies to comply and adopt a more socially responsible approach. Otherwise, it could have an impact on their profits and success.

Then, social audit becomes a tool to support companies to achieve socially responsible business. Several reasons explain why social audits are important:

  • Become a tool to understand, measure, report and evaluate the company’s social performance.
  • Increasing corporate accountability and transparency, for example by publishing audit reports, which ultimately leads to good governance. 
  • Gives the business a clear direction for future improvements in managing its social responsibilities, which, if done well, can enhance the company’s image.

What is audited?

Companies have a responsibility to their stakeholders. And, how they treat stakeholders – including related policies and practices – is an audited aspect. Examples are:

  • Employee training.
  • Development and promotion.
  • Worker diversity.
  • Occupational Health and Safety.
  • The fairness of the price set.
  • Guarantees and guarantees on products 
  • Customer privacy protection.
  • Contribution to society.
  • Community empowerment program.
  • Energy use

Are all of the above items audited? The answer is not necessarily. There are no standards on what should be audited. In addition, the audit is also optional, there is no obligation to do it and release the results to the public. 

What are the benefits of a social audit?

To get straight to the point, here are the benefits of a social audit:

  • It becomes a way to measure and evaluate corporate social responsibility to take mitigation steps against related risks, such as risks to the company’s reputation.
  • Management can identify gaps between performance and corporate social responsibility objectives.
  • Companies can develop measures and set targets to improve corporate social performance, either from improving past performance or through benchmarking with the best performing companies in the industry.
  • Implementing the improvements recommended by the auditors helps the company to meet stakeholder expectations, enabling it to build a good relationship with them in the long term.
  • Publishing audit reports leads to better information transparency and accountability, which can improve the company’s public image.
  • Improved transparency and accountability towards social responsibility are attracting more business customers and consumers as they increasingly make their purchasing decisions based on ethical factors.
  • From the results of the audit, the company can take steps to promote and develop a socially responsible culture for everyone in the company, for example by prioritizing customer privacy, which in turn supports a better reputation.

What are the limitations of social auditing?

Despite the good image and long-term success of the company, social audits also have the following limitations:

  • Auditors’ access to data and information, while crucial, is often limited because they may face resistance from management or key people, who do not want to be exposed in a negative way.
  • Audit results can be biased if the audit is not examined independently because often companies are more likely to report positive results just to increase positive publicity without actually intending to adopt a socially responsible approach.
  • Auditing consumes resources where companies have to spend a lot of time and money to produce a comprehensive social audit.
  • Social responsibility may not be the only reason consumers buy company products or suppliers sell inputs to companies, but for price reasons.

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