Social Audit

Social Audit: Evaluating Impact and Addressing Challenges

Social audit is a tool that enables organizations to measure, understand, and report their social and ethical performance, while also helping to improve it. By bridging the gap between an entity’s vision and reality, and between efficiency and effectiveness, a social audit aims to evaluate an organization’s social and environmental impact on society. Additionally, it enables local social service providers to stay informed about the ongoing needs of the local community.

An entity’s success is not only measured by its profitability but also by its commitment to ethical business practices. This includes paying fair and timely dividends to stockholders, providing fair salaries and wages to employees and laborers, and offering reasonable prices to clients and customers. By focusing on the extension, development, and enhancement of the business, an entity can become financially independent. In addition to the above, an entity must prioritize creating incentives and bonuses for employees and promoting the amenities of the local community. It must also strive to put an end to irregular activities that can exacerbate economic and social gaps. Evaluating working conditions, assessing the impact of business operations on the environment and local community, and formulating initiatives to develop the local communities are also critical objectives.

It was mandated by the Rural Employment Act of 2005 that projects executed under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) must undergo social audit as a requirement.

When conducting a social audit, it is essential to gather two types of data: secondary data obtained from government documents and reports, as well as primary data collected from stakeholders and community members. The process of gathering secondary information is particularly important in the social audit process. Generally, social audits are carried out by external auditors who are hired by the organization. The auditor should be unbiased and impartial to guarantee the validity and dependability of the audit results. Occasionally, internal auditors may also participate in the social audit process. In Case of Individual Who holds the required qualification and have attended a course at the National Institute of Securities and received a Certificate of Completion after successfully passing the course examination and also registered with Self-Regulatory Organisation. In case of Firm/Institution that has partners/employees who meet the criteria for being a social auditor and has a track record of minimum 3 years for conducting social impact assessment .

Meghalaya was the first state to bring social audit law in India

Benefits of Social Audit:

Social audit provides several benefits to businesses:

  1. It enhances transparency by bringing to light the company’s actions and decisions.
  2. It promotes accountability, as the company is held responsible for its actions and is required to provide explanations for any discrepancies found during the audit.
  3. A social audit helps identify areas of improvement, allowing the company to make necessary changes to enhance its social and environmental performance.
  4. Social audit helps to improve stakeholder relations by involving them in the process and addressing their concerns.
  5. Social audit strengthens the company’s brand image by showcasing its commitment to social responsibility.
  6. Social audit is a valuable tool for companies to assess their social and environmental impact and make necessary improvements to enhance their performance, while also building trust and credibility with stakeholders.

Challenges of Social Audit:

Social audits are intended to provide an assessment of the social and environmental performance of a company. However, many of these audits have serious shortcomings in their methodology which can affect their accuracy and reliability.

  1. Some audits have insufficient worker interviews, which means that the views and experiences of workers may not be fully captured.
  2. Additionally, language barriers can be a significant obstacle for audits conducted in countries where the local language is not the auditor’s native language. This can lead to misunderstandings, misinterpretations, and inaccuracies in the audit findings.
  3. Another issue is the lack of genuine worker engagement without fear of reprisal. Workers may be reluctant to speak up about their experiences and concerns due to fear of retaliation from their employers.

These challenges can all impact the effectiveness of social audits and their ability to provide a comprehensive and accurate assessment of a company’s social and environmental performance.


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