Professional Documents
Culture Documents
Block-5 Unit-16 PDF
Block-5 Unit-16 PDF
in
16.1 INTRODUCTION
The term ‘social audit’ may be interpreted in several ways. As far as common
understanding goes, it is an essential assessment of how well a company has
discharged its social obligations. However experts see it as a systematic and
comprehensive evaluation of an organization’s ‘social performance’ which is
interpreted as organizational efforts in enriching the general welfare of the whole
community and the whole society.
The need for social audit arises because of various reasons. In order to reach the
objective of enriching economic wealth for the shareholders, the firm do it at the cost
of social and environmental disorder. And since many would not take into account the
social costs of such negative implications, their prices do not reflect the real cost. The
organizations do it more because of competitive reasons. However if the larger
interest of society is to be preserved, there has to be some consideration for social
good.
The company is expected to behave and function as a socially responsible member of
the society like any other individual. It cannot shun moral values nor can it ignore
actual compulsions. There is a need for some form of accountability on part of the
management which is not only limited to shareholder alone. In modern times, the
objective of business has to be the proper utilization of resources for the benefit of
others. A profit may still be a necessary part of the total picture but it sould not be the
only purpose. The company must accept its obligation to be socially responsible and
30
to work for the larger benefit of the community.
ignoumbasupport.blogspot.in
Society expects businesses to share the fruits of progress and growth. Moreover, the Social Audit
social concern by the organization proves to be an asset for them in the long run
especially under environmental distress because of the goodwill and the positive
image earned all through these years.
Corporate Social Corporate accountability today spans emerging CSR issues like business ethics,
Responsibility
diversity, marketplace behaviour, governance, human rights, and labour rights as well
as more and more traditional areas of financial and environmental performance.
Interest in the inter-relationships between issues will also increase the complexity of
the corporate accountability debate; in many areas of the world, social issues are now
in ascendance, and these qualitative, complex issues are likely to be the ones against
which companies find it hardest to measure and verify performance.
Effective and accountable management systems help companies shape cultures that
support and reward CSR performance at all levels. As part of this effort, many
companies are working to increase accountability for CSR performance at the board
level. This can lead to changes in who serves on the board, how directors handle
social and environmental issues, and how the board manages itself and fulfills its
responsibilities to investors and other stakeholders. Companies are also seeking to
build accountability for CSR performance at the senior management level, in some
cases by creating a dedicated position responsible for broad oversight of a company’s
CSR activities. Finally, many companies are working to integrate accountability for
CSR performance into actions ranging from long-term planning to everyday decision-
making, including rethinking processes for designing products and services and
changing practices used to hire, retain, reward, and promote employees.
Demand for increased corporate accountability today comes from all sectors.
Evidence of this is found in the increasing number of sustainability-related market
indices and by external demands for certification or labeling of certain products.
Underpinning this demand for increased corporate accountability is the expectation
that companies can and should be more transparent, which essentially means
measuring, reporting on, and continuously improving social, environmental, and
economic performance. These increased demands are in part a result of recent events
that have contributed to erosion in the trust extended to companies. Stakeholders now
expect companies to provide access to information on impact of their operations, to
engage stakeholders in meaningful dialogue, and to be responsive to particular
concerns unearthed in the dialogue process. To increase the credibility of what is
disclosed, leadership companies are also investigating carefully the value of various
types of assurance that might support their reporting efforts.
Proliferation of Social and Environmental Reporting Standards: A variety of
organizations and initiatives are attempting to standardize social and environmental
reporting procedures to let stakeholders more easily compare companies’ performance
across facilities, sectors, and borders. Most noteworthy is the Global Reporting
Initiative (GRI), an international reporting standard for voluntary use by organizations
reporting on the economic, environmental, and social aspects of their activities,
products, and services. The GRI, convened by the Coalition for Environmentally
Responsible Economies (CEREs) in partnership with the United Nations Environment
Programme, incorporates the active participation of corporations, NGOs, accountancy
organizations, business associations, and other stakeholders from around the world
into the ongoing development of the reporting guidelines. Another example of a more
local standard is one launched in Brazil by the Ethos Institute for Social
Responsibility which has produced a set of indicators to help companies integrate
CSR into their management practices and to track and monitor their progress. In 2001,
a total of 71 Brazilian companies submitted reports to Ethos indicating their
performance against 35 indicators in the areas of values and transparency, workplace,
environment, suppliers, consumers/customers, community, and government and
society.
32
ignoumbasupport.blogspot.in
Enumerate examples where you see firms calculating the wealth generated, without
taking into account the social and environmental costs.
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
Illustrate few examples of Indian companies who in your opinion care for
environmental protection or are driven by ethical norms or are conscious of extending
equal opportunity to its employees while pursuing their commercial activity of
generating wealth.
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
Corporate Social Greater Government Regulation: Government regulators at all levels are calling on
Responsibility
companies to increase the quantity and quality of information they disclose to the
public about their practices and performance. On the whole, European governments
have been more active in advocating regulatory approaches than the U.S. government.
For instance, newly amended French legislation, called the Nouvelles Regulations
Economiques (NRE), require as of the beginning of 2003 that all companies listed on
the French stock exchanges to report to shareholders and stakeholders on a range of
social and environmental issues. Countries such as Denmark, Sweden, Norway, and
the Netherlands also have enacted legislation requiring specified companies to report
on aspects of their social and environmental performance.
Increased Stakeholder Activism: Many stakeholder groups are engaging companies
more directly, utilizing a wide range of tools, techniques, and technologies to bring
their interests to companies’ attention. These activists are also working to educate
lawmakers, the media, and the public about companies that are — or are not —
deemed to be accountable. Among the tactics being used by stakeholder groups are
public information campaigns, public protests, boycotts, and class-action lawsuits
seeking action and redress for perceived company misdeeds. At the same time,
stakeholders are developing new strategies that involve finding commonalities with
other groups to create alliances that cross both geographic boundaries as well as issue-
area divides. In doing so, they are able to directly engage companies with a much
stronger voice and with a much broader agenda.
Increased Shareholder Engagement: Company shareholders, both individuals and
institutions, have become increasingly vocal and aggressive in pressing companies to
be more accountable. Activist shareholders’ call for increased accountability have
included resolutions promoting greater disclosure of environmental and social
impacts, increased transparency in board actions and decisions, and requisitions for
company commitments to abide by internationally accepted social and environmental
principles. Whereas resolutions over the past few years often called for company
endorsement of specific standards — such as SA8000, the CEREs Principles or the
UN Global Compact — resolutions today most often use more general language on
adhering to the highest and best social and environmental standards appropriate to the
company so as to have broader/greater shareholder appeal. In addition, shareholder
activists are pushing for public disclosure of companies’ voting guidelines as well as
proxy votes by mutual funds. For instance, the U.S. Securities and Exchange
Commission recently approved regulation that will require mutual funds to disclose
how they vote on shareholder resolutions, a move that was strongly supported by
shareholder activists. Many companies continue to engage shareholders at annual
meetings or through the resolution process, a mechanism that shareholders use to
access management on issues of concern. However, some companies now meet
directly with shareholder activists and institutional investors in settings other than the
annual meeting. Some companies have developed staff positions or departments
responsible for addressing shareholder concerns on social and environmental issues.
The Growth of Information Technology: The Internet has provided companies and
those seeking greater corporate accountability an unprecedented ability to share and
exchange information — both accurate and inaccurate — on a large scale. Given the
largely unregulated nature of this form of communication, many companies are
finding that they need to monitor and engage more actively in the information being
disseminated. A number of companies now use the Internet to report proactively on
their social and environmental activities. Increasingly, companies are using the
Internet not only as a place to electronically post information originally developed for
print, but also taking advantage of the medium to provide more periodic, interactive,
and in-depth information about their performance. The Internet also allows companies
36
to receive feedback from stakeholders on the information they are sharing. Some
ignoumbasupport.blogspot.in
companies are finding that they can dilute or eliminate the impacts of negative, Social Audit
Internet-driven campaigns by engaging activists and other stakeholders directly,
helping to ensure the information they receive is as accurate as possible. At the same
time, a variety of non-governmental organizations, government entities, and for-profit
enterprises have established Internet sites that provide detailed information about
companies’ environmental performance, philanthropy, and other social impacts, in
some cases on a facility-by-facility basis. Another growing use of the Internet is to
allow shareholders to vote their proxies online, potentially enhancing the ability of
activist institutions and individuals to mobilize fellow shareholders in order to
influence company policy.
Increased Media Attention: Corporate social responsibility, and accountability more
broadly, have become topics of increased media attention and scrutiny, both in the
business press and the mainstream media. A number of publications now feature
regular articles on such accountability-related issues as board diversity and
independence, CEO compensation, board performance evaluation practices, and
company responses to shareholder concerns. Media attention has forced companies to
examine, and in some cases revise, their policies and practices on a range of CSR
issues. For example, in a case that is poised to set a significant precedent in the area of
corporate transparency, the U.S. Supreme Court has agreed to hear a case against
Nike, in which the company is accused of falsifying commercial speech in defense of
the working conditions at its supplier factories overseas. Allegations against the
company’s overseas labour practices have received significant media attention over
the past decade, leading to Nike’s assertion that the company should be
constitutionally protected to defend itself and highlight the human rights strides it has
made. Roughly 30 news organizations, including ABC, CBS, NBC and top newspaper
chains as well as organized labour and groups such as the American Civil Liberties
Union, argued in court filings that reporters will not be able to get company
executives to talk freely about the safety of products, racial discrimination or
environmental concerns about their industry, because of the fear of future lawsuits if
the case against Nike should be upheld.
Greater Government Regulation: Government regulators at all levels are calling on
companies to increase the quantity and quality of information they disclose to the
public about their practices and performance. Particularly in the area of the
environment, companies are facing new and growing amounts of regulation and
legislation aimed at increasing their accountability to society.
Activity 3
Discuss whether Indian companies should come forward in helping Tsunami victims.
Do you consider they have any social responsibility towards this natural disaster?
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
16.6 SUMMARY
Social Audit in business intends to examine an organization’s efforts in enriching the
general welfare of the whole community and the whole society. In modern times, the
objective of business is to provide benefits to others and the society expects
businesses to share the fruits of progress and growth. Corporate accountability 37
ignoumbasupport.blogspot.in
Corporate Social encompasses the systems which a company establishes in order to develop policies,
Responsibility
indicators, targets and processes to manage the full range of its activities towards
society. Demand for increased corporate accountability today comes from all sectors
and various types of social audit system is being developed in order to take such
accounts. Few key developments enabled by technology and information revolution
has broadened the scope for such an audit to be made within organizations and shared
in public.