What is the scope of social accounting?

Answer 1

Formal accountability

In social accounting the focus tends to be on larger organisations such as multinational corporations (MNCs), and their visible, external accounts rather than informally produced accounts or accounts for internal use. The need for formality in making MNCs accountability is given by the spatial, financial and cultural distance of these organisations to those who are affecting and affected by it.[9]

Social accounting also questions the reduction of all meaningful information to financial form. Financial data is seen as only one element of the accounting language.[10]

[edit]Self-reporting and third party audits

In most countries, existing legislation only regulates a fraction of accounting for socially relevant corporate activity. In consequence, most available social, environmental and sustainability reports are produced voluntarily by organisations and in that sense often resemble financial statements. While companies' efforts in this regard are usually commended, there seems to be a tension between voluntary reporting and accountability, for companies are likely to produce reports favouring their interests.[11]

The re-arrangement of social and environmental data companies already produce as part of their normal reporting practice into an independent social audit is called a silent or shadow account.

An alternative phenomenon is the creation of external social audits by groups or individuals independent of the accountable organisation and typically without its encouragement. External social audits thus also attempt to blur the boundaries between organisations and society and to establish social accounting as a fluid two-way communication process. Companies are sought to be held accountable regardless of their approval.[12]It is in this sense that external audits part with attempts to establish social accounting as an intrinsic feature of organisational behaviour. The reports ofSocial Audit Ltd in the 1970s on e.g. Tube Investments, Avon Rubber and Coalite and Chemical, laid the foundations for much of the later work on social audits.[13]

[edit]Reporting areas

Unlike in financial accounting, the matter of interest is by definition less clear-cut in social accounting; this is due to an aspired all-encompassing approach to corporate activity. It is generally agreed that social accounting will cover an organisation's relationship with the natural environment, its employees, and ethical issues concentrating upon consumers and products, as well as local and international communities. Other issues include corporate action on questions of ethnicity and gender.[9]

[edit]Audience

Social accounting supersedes the traditional audit audience, which is mainly composed of a company's shareholdersand the financial community, by providing information to all of the organisation's stakeholders. A stakeholderof an organisation is anyone who can influence or is influenced by the organisation. This often includes, but is not limited to, suppliers of inputs, employees and trade unions, consumers, members of local communities, society at large and governments.[14]Different stakeholders have different rights of information. These rights can be stipulated by law, but also by non-legal codes, corporate values, Mission Statements and moral rights. The rights of information are thus determined by "society, the organisation and its stakeholders".Cite error: A set of tags are missing the closing ; see the help page.[15][16][17][18][19]In many instances the reports are produced in (partial or full) compliance with the sustainability reporting guidelines set by the Global Reporting Initiative (GRI).

Traidcraftplc, the fair trade organisation, claims to be the first public limited company to publish audited social accounts in the UK, starting in 1993.[20][21]

The website of the Centre for Social and Environmental Accounting Research contains a collection of exemplary reporting practices and social audits.

[edit]Format

Companies and other organisations (such as NGOs) may publish annual corporate responsibility reports, in print or online. The reporting format can also include summary or overview documents for certain stakeholders, a corporate responsibility or sustainability section on its corporate website, or integrate social accounting into its annual report and accounts.[7]

Companies may seek to adopt a social accounting format that is audience specific and appropriate. For example, H&M, asks stakeholders how they would like to receive reports on its website;Vodafonepublishes separate reports for 11 of its operating companies as well as publishing an internal report in 2005; Weyerhaeuserproduced a tabloid-size, four-page mini-report in addition to its full sustainability report.[22]