In this competitive business environment every organisations are likely to show their concerns for some universal responsibilities as a responsible member of the planet. Such responsibilities are social, environmental and economical. The sense of social accounting is actually not that easy to explain exactly because the meaning is different to different people. "A corporation's social responsibility is to make a profit"(Milton Friedman, The Economist). The most probable reason behind this critique could be, for e.g. if the companies are doing remarkably good as a part of their social responsibilities, it is obvious that the company will able to make good profit by getting positive response from stakeholders, customers concern entities etc.
The concept of "Social Accounting" has become more important as a result of industrial growth, which has brought in prosperity as well as problems to society. If an organization has to function effectively, it has to be accountable to the public at large. Social Accounting is the branch of accounting which measures, analyse and record the society and the enterprise itself both in qualitative terms (Ghosh, 2004). Social Accounting is defined by Richard Dobbins and David Fanning as "the measurement and reporting of information concerning the impact of an entity and its activities on society".
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In the past, maximisation of wealth was seen as a main goal of the companies. However, with the improvement in social conditions and rising standards of living, stakeholders forced their companies to disclosure their accountability to society. The consumer's pressures to encourage the large corporations to behave ethically and socially constructively was the concept of social accountability emerged in Great Britain in the 70's. Thirty years later, several small and large, private or public companies voluntarily started to show interest in establishing their social and in elaborating a series of documents to simply meet these requirements (Anderson, 1997).
Ackerman (1975) who argued that big business was recognising the need to adapt to a new social climate of community accountability, but that the orientation of business to financial results was inhibiting social responsiveness. McDonald & Puxty (1979) on the other hand maintain that companies are no longer the instruments of shareholders alone but exist within society and so therefore have responsibilities to that society, and that there is therefore a shift towards the greater accountability of companies to all participants. Implicit in this concern with the effects of the actions of an organisation on its external environment is the recognition that it is not just the owners of the organisation who have a concern with the activities of that organisation.
From the notion of CSR it is possible to derive the complementary concept of accountability (AccountAbility, 1999), which means that the company is held accountable for its actions. If companies want to manage CSR and sustainability issues and obtain the trust of their stakeholders they must not only communicate, but also give concrete evidence that they are committed to continual, long-term improvement. Therefore, a sustainability and responsibility-oriented company must define appropriate systems to measure, control and evaluate corporate performance.
Key indicators of good Social Accounting_>
As Zadek et al (1997) introduced eight key elements of good social accounting or account. These are inclusivity, comparability, completeness, evolution, management and politics system, disclosure, external verification, continuous improvement.
A two-way communication with the stakeholders by involving them and respecting their views indicates good social account.
For social performance assessment to be meaningful, comparisons should occur between different periods, other organisations and relative to external standards or benchmarks.
Rather than focusing on the positive potential areas only, all other areas of the organization's activities ought to be included in the assessment to make it complete.
Social accounting practices ought to be expressing a dedication to learning and change, in order to reflect changing stakeholder expectations.
Management policies and systems_>
Management policies and systems should be strengthened within system and procedures that allow organisation to be thoroughly controlled and estimated in order to ensure efficient institutionalization of the social accounting process.
Always on Time
Marked to Standard
It should involve clear disclosure of accounts and report to all stakeholders, in a form that is appropriate to their needs, in order to have a good social accounting.
The extent to which audiences will have faith and confidence in a social account will depend to some extent on whether it has been verified as a true representation of reality by an external body trusted by that audience. The perceived independence of verifiers from the organization will also be critical in this respect.
The continuous improvement of an organisational performance across the areas covered by the process, and to extend the process to areas currently not assessed, or assessed unsatisfactorily could be a good method of social accounting.
Global Standards for Social Accounting
The question of standards for sustainability activity is one which has been in existence for a long time and gradually some standards for reporting are starting to emerge. In many ways the development of sustainability reporting standards parallels the development of accounting standards - with a focus upon the harmonisation of common standards now being the main issue to consider. The essential point is that compliance is voluntary rather than mandatory and this voluntary approach to CSR expresses the reality of enterprises in beginning to take responsibility for their true social impact and recognises the existence of a larger pressure exercised by various stakeholder groupings in addition to the traditional ones of shareholders and investors.
1. Institute of Social and Ethical Accounting (ISEA) - AA1000
ISEA founded in 1996 in Great Britain with the purpose of consolidating the social accountability and the ethical behaviour in the business and non-profit organizations sector. ISEA issued standards on social accounting and introduced the Accountability Standard 1000 (AA 1000) in 1999.
The AA1000 guidelines from AccountAbility provides guidance on how to establish a systematic stakeholder engagement process that generates the indicators, targets and reporting systems needed to ensure its effectiveness in impacting on decisions, activities and overall organizational performance (www.accountability.org.uk). (Microsoft & Apple)
2. Global Reporting Initiative (GRI)
The Global Reporting Initiative (GRI) produced its Sustainability Reporting Guidelines which have been developed through multi-stakeholder dialogue. The Guidelines are claimed to be closely aligned to AA1000, but focus on a specific part of the social and environmental accounting and reporting process, namely reporting. The GRI aims to cover a full range of economic issues, although these are currently at different stages of development. The GRI is an initiative that develops and disseminates voluntary Sustainability Reporting Guidelines.
These Guidelines are for voluntary use by organisations for reporting on the economic, environmental and social dimensions of their activities, products and services. Although originally started by an NGO, GRI has become accepted as a leading model for how social, environmental and economic reporting should take place. It aims to provide a framework that allows comparability between different companies' reports whilst being sufficiently flexible to reflect the different impacts of different business sectors.
3. The International Standards Organisation (ISO)
ISO has developed an extensive range of standards. Among those that are directly related to corporate responsibility are those that refer to quality and the environment through the ISO 9000 and ISO 14000 series.
ISO 9000 SERIES OF STANDARDS ON QUALITY MANAGEMENT
The ISO 9000 family is primarily concerned with 'quality management'. This means what the organisation does to fulfil the customer's quality requirements, and applicable regulatory requirements, while aiming to enhance customer satisfaction and achieve continual improvement of its performance in pursuit of these objectives.
More specifically, ISO 9001:2000 is used if an organisation is seeking to establish a management system that provides confidence in the conformance of their product to established or specified requirements. It is now the only standard in the ISO 9000 family against whose requirements a quality system can be certified by an external agency.
ISO 14000 SERIES OF STANDARDS ON ENVIRONMENTAL MANAGEMENT
The most popular kind of environmental management system (EMS) is developed in accordance with ISO 14001:2004, an international standard which was published for the first time in 1996 as ISO 14001:1996 by the International Organisation for Standardisation (ISO) and which was reviewed and published again in 2004.
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ISO 14001:2004 defines an environmental management system as that part of the overall management system of an organisation that includes organisational structure, planning activities, responsibilities, practices, procedures, processes and resources for developing, implementing, achieving, reviewing and maintaining the environmental policy.
4. Social Accountability International (SAI)
In 1997, Social Accountability International (SAI) was established and convened an expert, international, multi-stakeholder, Advisory Board to partner in developing standards and systems to address workers rights. Representatives of trade unions, human rights organisations, academia, retailers, manufacturers, contractors, as well as consulting, accounting, and certification firms, by consensus, co-operated to develop the SA 8000 (SA 8000) Standard. Published in late 1997 and revised in 2001, the SA 8000 Standard and verification system is a credible, comprehensive and efficient tool for assuring humane workplaces.
Standards for reporting are obviously important as they enable comparison and benchmarking, as well as the tracking of change over time. Indeed Robson (1992) extends this and states that one of the qualities of such reporting is that it enables action at a distance which he describes as inscription. In doing so, this emphasises the role of reporting standards in enabling the transferring of best practice.
AA 1000 Framework_>
In November 1999 AccountAbility (ISEA, Institute of Social and Ethical AccountAbility) published AccountAbility 1000 (AA1000) (AccountAbility, 1999). AA 1000 Framework - the AA 1000 Framework was developed to help organisations build their social responsibility and â†’ accountability through high quality accounting, â†’ auditing and reporting. It is driven by inclusivity and requires organisations to integrate stakeholder engagement processes into their core management activities. This included sections on purpose and principles, framework for integration, â†’ assurance and stakeholder engagement.
The AA 1000AS is based on assessment of reports against three principles:
Materiality - does the sustainability report provide an account covering all the areas of performance that stakeholders need to judge the organisation's sustainability performance?
Completeness - is the information complete and accurate enough to assess and understand the organisation's performance in all these areas?
Responsiveness - has the organisation responded coherently and consistently to stakeholders' concerns and interests?