(Online Course) Pub Ad for IAS Mains: Accountability & Control - Social Audit (Paper -1)

(Online Course) Public Administration for IAS Mains Exams

Topic: Accountability and control: Social Audit

Social auditing is a process that enables an organisation to assess and demonstrate its social, economic, and environmental benefits and limitations. It is a way of measuring the extent to which an organisation lives up to the shared values and objectives it has committed itself to.

Social auditing information is collected through research methods that include social book-keeping, surveys and case studies. The objectives of the organisation are the starting point from which indicators of impact are determined, stakeholders identified and research tools designed in detail.

In the 70s, when. it first appeared, social audit was a response to the budding consumer movements that rode on the issues of unsafe products and to the environmentalists’ movements that protested on the wanton dumping of pollutants to the environment. And in the last decade when it resurfaced from the lull in the 80’s social audit was driven, and literally forced upon, by the ‘green business’ and ‘ethical investments’ communities that came to prominence through highly publicised boycotts of firms. Social audit in origin, it can be said then, has roots in the dire need to make business organisations more accountable to people and communities. That some business organisations’ decisions and actions have far-reaching implications on, and consequences to, communities and lives of peoples have to be recognised, and that whatever their impact - either beneficial or non-beneficial - these organisations have to account for them on the ground of social responsibility. Social Audit is thus, a method of ensuring accountability of any authority, governmental or otherwise, of its actions and inactions, what it chose to do, the manner in which it is being done and the analysis of what is done.

Factors Credited for its Growth

Several factors are credited for having contributed to the significant growth of social audit These are:

1. Investigative reporting by mass media organisations into the impacts, usually negative, of corporations and other institutions on people, on the local community and on the environment;
2 As pressures filed-up in the 1980s about the impact of industry on the environment, standards began to be developed requiring companies, and others, to report on likely and actual environmental ramification of its continued operations.
3. The growth of interest in ethical investment has led to the need to uncover and better understand just what corporations do and how they use the funds invested in them.
4. Consumers themselves, through consumers’ organisations, have become more conscious of how their patterns of consumption can affect the actions of corporations and even governments.
5. The movement of corporate social responsibility has given the impetus to shift from simply doing good things in the community to one that embrace the notion of improved accountability to stakeholders and the need to explain themselves, if only to maintain a license to operate.
6. The idea of stakeholders has opened up new understanding that all organisations affect far more people than was perhaps realised in the past and that these stakeholders have a legitimate right to at least know what is going on, or even have some influence on them.
7. And most recently the introduction’ of the concept of best value reinforces the legitimacy of recognising softer outcomes as well as hard outputs at the same time as making it more essential that there is some way of accounting for and reporting on that softer performance.

Principle of Social Audit

In the past years, there have been substantial efforts to define common themes in social audit. From the experience of all those involved, a good social audit carries the following characteristics:

1. Improved social performance: This is the overarching principle, and this refers to the continuous improvement in performance by the organisation relative to the chosen social objectives as the result of social audit.
2. Multi-perspective: It is important for all groups affected or who affect the organisation to be included in the process.
3. Comparative: The process should allow for comparison with other organisations, over time and between stakeholder groups.
4. Comprehensive: The process should be designed to collect all relevant materials and areas of concern should not be left out simply because the organisation would not like the result.
5. Regular: To facilitate comparability and to demonstrate a commitment to the process, it should be regular, with a frequency of once every two years.
5. Verified: Verification by independent auditors gives the process credibility.
6. Published: The result (or a synopsis) of the audit should be published so that the stakeholders can see the results and to encourage openness.
7. Improvement: It is important to receive feedback about the process itself and the report, and to improve the system over time.
8. Embeddedness: The social audit process should be integrated with other business information gathering system.

The Scope of Social Audit

Social audit is the generic term referring to the full range of activities of the entire procedure. In effect, it encompasses the following activities:

1. Social accounting, which covers:

(a) Social book-keeping, an activity whereby all information related to social performance based on the organisation’s social objectives are collected, recorded and systematically classified;
(b) Summarisation and interpretation of the data; and
(c) Reporting the information to management.

2. Social auditing, which covers:

(a) Verification of the information, and certification as to the correctness of the information; and
(b) Reporting the information to all the stakeholders and the public.

The scope of a social audit is not restricted to corporate decisions and actions that have a specific ‘social’ focus. Social audit is concerned with any action or decision initiated by the organisation that has social consequences. Social audit extends beyond the usual myopic preoccupation with corporate interests to the more socially “responsible concerns, including the broader impact of corporate decisions and actions to people and communities. Of course, this is not for philanthropy, entirely; because any organisation will benefit from taking into account the expectations of individuals, groups and other organisations that affect the success of its operation.

Indian Scenario

Historically, after the attainment of Independence, the initiative take through land reforms in nearly the entire territory came with a certain proliferation of bureaucracy. While the initiative taken was necessary, what proliferated put a burden on the entire political economy, reducing it to the demand and command polity (Rudolf and Rudolf). By the mid 1960s, the entire structure crumbled down and a peasant uprising in Naxalbari rang the alarm bells. Measures, such as splitting the rul ing party in two, bank. Nationalization coercive population control, anti-poverty programmes (all under the rubric of garibi hatao) and going to war in 1971 were the means for Indira Gandhi to regain popularity. The approach was incremental, even then, Indira Gandhi was able to manage the structure without much changes. However, the JP Movement that combined in itself a loose confederation of widespread protestors - students, workers’, peasants, working classes, and political opposition, against the totalitarian regime, ended the domination of one party rule. The regimes changed since then and so have changed the way, the bureaucracy and service delivery system structured. By the launch of National Economic Policy in 1991, the stage was set for embracing the clientele.

Social audit assumes even greater importance in the context of democratic decentralisation since 1992-93. Structures for accountability are the weakest in panchayats and municipal bodies who are implementing anti-poverty programmes and providing basic social services. Half-hearted devolution of powers by most state governments continues to stymie their effectiveness. Planning by district planning committees as envisaged in the constitutional amendments has hardly been operationalised. At the sub-district level of taluk and gram panchayats, poor book-keeping is coupled with audit certification by Examiners, Local Funds of the state governments, which is by and large no more than an exercise in stamping and signing inadequately authenticated accounts. Hearing the complaints of residents before certifying accounts, as is the audit convention for local authorities in Europe, is nowhere even on the agenda in India. The sheer spread and numbers of the local bodies, to be considered against the availability of ethical auditors, are daunting.

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