What Is a Social Audit?

A social audit is a formal review of a company's endeavors, procedures, and code of conduct regarding social responsibility and the company's impact on society. A social audit is an assessment of how well the company is achieving its goals or benchmarks for social responsibility.

Understanding a Social Audit

Ideally, companies aim to strike a balance between profitability and social responsibility. A social audit is an internal examination of how a particular business is affecting society. The audit helps companies to determine if they're meeting their objectives, which may include measurable goals and benchmarks. A social audit 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, corporations are often expected to deliver value to consumers and shareholders as well as meet environmental and social standards. Social audits can help companies create, improve, and maintain a positive public relations image. For many companies, a good public perception helps foster a positive image of the company and ultimately reduce negative impacts on earnings from bad press.

Items Examined in a Social Audit

The scope of a social audit can vary and be wide-ranging. The assessment can include social and public responsibility but also employee treatment. Some of the guidelines and topics that comprise a social audit include the following:

  • Environmental impact resulting from the company's operations
  • Transparency in reporting any issues regarding the effect on the public or environment.
  • Accounting and financial transparency
  • Community development and financial contributions
  • Charitable giving
  • Volunteer activity of employees
  • Energy use or impact on footprint
  • Work environment including safety, free of harassment, and equal opportunity
  • Worker pay and benefits
  • Nondiscriminatory practices
  • Diversity

There is no standard for the items included in a social audit. Social audits are optional, which means that companies can choose whether to release the results publicly or only use them internally.

The flexibility surrounding social audits allow companies the ability to expand or contract the scope based on their goals. While one company might wish to understand the impact it has on a particular town or city, other companies might choose to expand the range of the audit to include an entire state, country, or throughout the globe.

Example of a Social Audit

Salesforce.com (CRM) is a Fortune 500 company and one of the largest enterprise software companies in the U.S. As part of its social audit and assessment, the company has strived to use 100% renewable energy globally. The company lists its findings including an annual Stakeholder Impact Report on its website. Below is a portion of the report from 2017. 

By continuously striving to meet and exceed their social responsibility benchmarks, companies can improve their public perception over time; social audits help companies achieve a balance between profits and ethics.

According to the company's website, Salesforce was one of the first cloud companies to commit to powering all data center operations with renewable energy. Below is a graph from the company's stakeholder report showing where the company stands in its goal of 100% renewable energy.

Salesforce Social Audit Example
Salesforce Social Audit Example.  Investopedia

Use of Social Audit Findings

Since social audits are voluntary, any release of the findings to the general public is also voluntary. While positive results might be disclosed, negative results might be kept internal and used to identify potential improvements that can make the results of the next social audit more favorable.

For example, a company might find out through its assessment that the company was not adequately involved in charitable activities within the community. As a result, company executives could enact initiatives with measurable goals designed to increase community involvement. The activities could be monitored and analyzed during the next social audit.

By continuously striving to meet and exceed its social responsibility benchmarks, the company can improve its public perception over time. In short, social audits help companies achieve a balance between profits and ethics.

Key Takeaways

  • A social audit is a formal review of a company's endeavors, procedures, and code of conduct regarding social responsibility and the company's impact on society. 
  • A social audit is an assessment of how well the company is achieving its goals or benchmarks for social responsibility.
  • Ideally, companies aim to strike a balance between profitability and social responsibility.