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Definition of social accounting
According to Gray, Owen & Maunders, social accounting is the process of communicating the social and environmental effects of organizations’ economic actions to particular interest groups within the society at large.
In reference to Crowther, (20) social accounting can be defined as “an approach to reporting a firm’s activities which stresses the need for the identification of socially relevant behavior, the determination of those whom the company is accountable for, its social performance and the development of appropriate measures and reporting techniques.”
This in simpler terms is a system in which industries look for ways in which to place rates on the society for its actions. It may include effect on the environment due to the packaging of its products, cost of fuel used in company vehicles, effect on the environment due to its waste emissions either gaseous waste or liquid waste that contributes to pollution just to mention but a few.
Principles of good social accounting
There are eight precise basic principles of social accounting that have been identified by Crane & Matten they are namely: inclusivity, comparability, completeness, evolution, management of policies and systems, disclosure, external verification and continuous improvement.
Inclusivity: The organization or company seeks to hear the share holders and clients’ ideas so as to find out if their products or services are genuinely accepted and reliable. By taking these ideas into account, the organization or company incorporates them into their activities and this displays the vision of everyone engaged and involved in the affairs of the organization or company.
Comparability: Comparison enables the organization to evaluate its accomplishments on a yearly basis; alongside suitable peripheral standards and produce for assessments with other organizations which undertake similar activities and account in the same fashion. Comparison also creates room for healthy competition and tensions among similar organizations leading to better services and goods production for the consumer.
Completeness: The organization intends to thoroughly look through and report on all the undertakings of the organizations work and the performance levels of all activities carried out by the organization and their share holders.
Evolution: In order to reflect changing stakeholder anticipations, social accounting practices should also display an obligation to learning and revolution so as to ensure the organization keeps on growing positively.
Management policies and systems: To guarantee efficient establishment of the social accounting process, it should be merged within schemes and actions that allow for it to be meticulously managed and assessed.
Continuous Improvement: The organization intends to create a habit of giving social accounts at regular intervals say, twice a month, monthly, quarterly or whichever duration of time they choose so that ideas and routine can become part and parcel in the ethos of the organization by taking into consideration all the actions of the organization.
External verification: The organization makes sure that the social records are inspected by a well knowledgeable person who does not have any interest whatsoever in the organization or company.
Disclosure: This guarantees that the inspected accounts are revealed to the stakeholders and the whole community at large in the wellbeing of being accountable, honest and transparent.
Global standards developed for social and environmental reports
According to Cooper (36) the following are some of the accountability global standards that have been developed for social and environmental reports.
Standard AccountAbility 1000 (AA1000), is firmly fixed on securing the value of social and ethical accounting, auditing and reporting. Kurian (48) notes “It can be used in two different ways: as a common currency underpining the quality of specialized accountability standards existing and emergent; and as a stand alone system and process for managing and communicating social and ethical accountability and performance”.
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Standard (SA8000) is fundamentally involved with labour and is relates with the need for organizations to comply with national and international labour law. It spells out the necessities for social accountability to make it possible for a company to: develop, maintain, and enforce policies and procedures in order to manage those issues which it can control or influence; and to demonstrate to interested parties, procedures and practices are in conformity with the requirements of these standards. (Kurian, 124)
In conclusion, social accounting not only helps the organizations to measure their performance and compare its performance to its competitors, it also helps the public get to know the activities carried out by the organization and the effects of these activities on the environment and on individuals as well.
Through social accounting, individuals can take action against corporations and organizations that pollute the environment and hold these organizations and corporations liable to their activities and their effects not only on the environment but also on individuals.
Organizations through social accounting are able to get direct feedback from the consumers and the individuals involved in the activities of the organization which will enable the organization to improve on their weak areas and improve on the areas that are doing well be it production of goods or provision of services. In addition, social accounting on organizations opens the door to criticism which the organization can use to improve not only in its image but in its services as well.
Cooper, Stuart. Corporate Social Performance: a Stakeholders Approach. USA: Ash gate Publishing Company, 2004. Print
Crane, Andrew, & Matten Dick. Business Ethics: managing corporate citizenship and sustainability in the age of globalization. Oxford University Press, 2007. Print
Crowther, David. Social and Environmental Accounting London: Financial Times Prentice Hall, 2000. Print.
Gray, Richard & Maunders Kevin. Corporate Social Reporting: Accounting and Accountability. Hemel Hempstead: Prentice Hall, 1987. Print
Kurian Thomas. Social Audit: A Tool for Performance Improvement and Outcome Measurement. Centre for Good Governance: Hyderabad, 2005. Print.