What is a 'Social Audit'

A social audit is a formal review of a company's endeavors in social responsibility. A social audit looks at factors such as a company's record of charitable giving, volunteer activity, energy use, transparency, work environment, and worker pay and benefits to evaluate what kind of social and environmental impact a company is having in the locations where it operates.

BREAKING DOWN 'Social Audit'

Social audits are optional. Companies can choose whether to perform them and whether to release the results publicly or only use them internally.

A social audit is an internal examination of how a particular business is affecting a society. It serves as a way for a business to see if the actions being taken are being positively or negatively received and relates that information to the company’s overall public image.

In the era of corporate social responsibility, when corporations are often expected to deliver value to consumers and shareholders as well as meeting environmental and social standards deemed desirable by some members of the general public, social audits can help companies create, improve and maintain a positive public relations image. Good public relations is key; the way a company is perceived usually has an impact on its bottom line.

Items Examined in a Social Audit

A social audit examines issues regarding internal practices or policies and how they affect the identified society. The activities included tend to pertain to the concepts of social responsibility. This can include activities affecting the financial stability of a region, any environmental impact resulting from standard operations and issues of transparency in reporting.

There is no standard regarding what must be considered as the society during the audit. This allows a business to expand or contract the scope based on its goals. While one company may wish to understand the impact it has on a small-scale society, such as a particular city, others may choose to expand the range to include an entire state, country or the world as a whole.

Use of Social Audit Findings

As a social audit is completely voluntary, the results of the audit are not required to be released to the general public or any regulatory agency. While positive results may be voluntarily disclosed, negative results may be kept internal and used to identify potential improvements that can make the results of the next social audit more favorable. For example, if a company found that the examined society did not believe it was adequately involved in charitable activities within the community, the company might choose to increase efforts in this area in the hopes of improving public perception.

Cosmetics and skin care firm The Body Shop made public the results of a social audit in the mid-1990s that showed the company was not doing enough toward sustainability. Taking that audit into account, in the years since, the company has incorporated all kinds of policies toward its goal of becoming the most sustainable, green friendly company in the world. In 2016, to mark its 40th year of existence, The Body Shop laid out key sustainability targets, including: helping 40,000 economically vulnerable people access work around the world; guaranteeing all of its natural ingredients are traceable and sustainably sourced; and powering all of its stores with renewable or carbon-balanced energy.

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