Presentation On Social Responsibility Of Business And Social Audit

Business depends on the society for the inputs like money, men and skills. Business also depends upon the society for market where product may be sold to their buyers. Thus, business depends upon the society for existence, sustenance and encouragement. Once society ceases to have any use for business, it has no place and reason to live. Being so much dependent, business has definite responsibility towards society. Popularly called the social responsibility of business.

Social responsibility is understood as the obligation of decision makers to take actions which protect and improve the welfare of society as a whole along with their own interests. Every decision the businessman takes and every action he contemplates have social implications. Whether the issue is significant or not, the businessman should keep his social obligations in mind before contemplating any action.

1. Business which survives using the resources of the society has a responsibility to the society. 2. Business which is an integral part of the social system has to care for the varied needs of the society. 3. Social involvement of business would foster a harmonious and healthy relationship between the society and the business to the mutual benefit of both. 4. Social responsibilities like recycling of waste may have favorable financial effects. 5. Social involvement may discourage additional government regulation and intervention. 6. Social involvement may create a better public image for the company.

1. Business should confine to its own business. There are government and social organizations to carry out social activities. 2. Involvement in social activities could adversely affect the economic health of a business enterprise. It may be noted that the expenditures on social welfare has been imposing severe burden on Tata Iron And Steel Company (TISCO). 3. If the cost of the social involvement of the business is ultimately passed on to consumers, there is no point in exalting the social involvement of business.

4) Many companies involve themselves in social activities because of the tax exemptions on the income spend on special social purposes. 5) If the social involvement of business enterprise causes an increase in the price of its products, it could affect the competitiveness both in the domestic and international markets. 6) Social involvement of business could led to an increase in the dominance or influence of business over the society.

The Individual Manager

The Organization The Industry

The Individual Manager:

The individual manager is the person who is ultimately responsible for the social action programmes of any organization. The manager can initiate , advocate , and put programmes into effect. The manager can also hinder and prevent programmes from being planned or implemented.

The Organization:
At the organization's level, the greatest barrier is the focus on profits. Shareholders want profits distributed in dividends or invested to expand production. Employees want higher salaries and better working conditions . Against these competing claims, social programmes may have little chance.

The Industry:
There may not be support from competitors in the same industry for social action programmes.

Responsibility To Shareholders Responsibility To Employees Responsibility To Consumers

Responsibility To Community

 The responsibility of the company to its shareholders, who are the owners ,is indeed a primary one. In fact the risk taken by the shareholders in making investment in the business should be adequately recognised. To safeguard the capital of the shareholders and to provide a reasonable dividend, the company has to strengthen and consolidate its position. Adequate reserves should be built up by the company so that it will be able to declare a reasonable dividend during a lean period as well. By innovation and growth the company should consolidate and improve its position and help strengthen the share prices.

 The shareholders are not only interested in the protection of their investment and the return on it but also in the image of the company. It shall, therefore, be the endeavour of the company to ensure that its public image is such that the shareholders can feel proud of their company.

The success of an organisation depends to a very large extend on the morale of the employees and their whole hearted cooperation. Employee morale depends on the large extent on the discharge of the companys responsibility to them. The responsibility of the organisation to the workers include: The payment of fair wages The provision of the best possible working conditions The establishment of fair work standards and norms The provision of labour welfare facilities to the extent possible and desirable Arrangements for proper training and education of the workers Reasonable chances and proper system for accomplishment and promotion The installation of an efficient grievance handling system An opportunity for participating in managerial decisions to the extent desirable.

According to PETER DRUCKER, There is only one valid definition of business purpose; to create a customer. It has been widely recognised that customer satisfaction shall be the key to satisfying the organizational goals. Important responsibilities of the business to the customers are: To improve the efficiency of the functioning of the business so as to (a) increase productivity and reduce prices, (b) improve quality, and (c) smoothen the distribution system to make goods easily available. To do research and development, to improve quality and introduce better and new products.

 To take appropriate steps to remove the imperfections in the distribution system, including blackmarketing or profiteering by middlemen or anti-social elements. To supply goods at reasonable prices even when there is a sellers market. To provide the required after-sales services. To avoid misleading the customers by improper advertisements or otherwise. To provide an opportunity for being heard and to redress genuine grievances. To understand customer needs and to take necessary measures to satisfy these needs.

A business has lot of responsibility to the community around its location and to the society at large. These responsibility includes: Taking appropriate steps to prevent environmental pollution and to preserve the ecological balance. Assisting in the overall developmental of the locality. Taking steps to conserve scarce resources and developing alternatives , wherever possible. Improving the efficiency of the business operation. Contributing to research and development. Development of backward areas. Making possible contribution to furthering social causes like the promotion of education and population control. Contribution to the national effort to build up a better society.

According to Mr. Ahmed, Social audit is much like the financial audit is an identification and examination of the activities of the firm in order to assess , evaluate , measure and report their impact on the immediate social environment. Social audit involves: Identification of the firms activities having potential social impact. Assessment and evaluation of the social costs and social benefits of such activities . Measurement of the social costs and benefits Reporting that is presenting in a proper format and manner , the social performance of the firm.

A social audit is a systematic study and evaluation of an organization's social performance, as distinguished from its economic performance. It is concerned with the possible influence on the social quality of life instead of the economic quality of life. Social audit leads to a report on the social performance of a business unit.

1) The areas for social audit includes any activity which has significant social impact, such as activities affecting environmental quality, consumerism, opportunities for women and other disadvantaged people in society . 2) Social audit can determine only what an organization is doing in social areas, not the amount of social good that result from these activities. 3) Social performance is difficult to audit because most of the results of social activities occur beyond the companys gate and the company has no means of securing data on the results. 4) Social audit use both qualitative and quantitative data. Quantitative data are precise and convincing, but in the areas of social philosophy and human values it is misleading to report only quantitative data. Normally a firm uses as much quantitative data as possible and then supplements it with qualitative data.

Although the idea of social audit originated in the United States about half a century ago, it is only recently that it received serious attention of corporations even in the advanced countries. The first comprehensive social audit in India was conducted by the TISCO (Tata Iron and Steel Company Ltd.) in 1980. It was conducted by Social Audit Committee appointed by the Board of Directors of the company , To examine and report whether , and the extent to which ,the company has fulfilled the objective regarding its social and moral responsibilities to the consumers , employees , shareholders, society and the local community.

Some companies like the Cement Corporation of India have been making some social reporting in their annual reports. The High Powered Expert Committee on Companies and MRTP Acts observes that the acceptance of the concept of social responsibility must be reflected in the information and disclosures that the company makes available for the benefit of its various constituentsshareholders , creditors, workers and the community, in as precise and clear terms as possible, the various activities relating to social responsibility which have been carried out by the company in the previous year. Started with TISCO , the social audit has picked up. UTI , the premier financial institution, has also planned for social audit.

1) The basic objective of social audit is to evaluate the social dimensions of the performance of the company. 2) Another principle objective which follows the objective mentioned above is to take measures to improve the social performance of the company on the basis of the feed back provided by the social audit. 3) Social audit increases the public visibility of the organization. 4) If the social audit reveals a socially commendable performance of the company, it will help to boost the public image of the company.

Social Process Audit

Financial Statement Format Audit

Macro-Micro Social Indicator Audit Constituency Group Audit

Partial Social Audit

1. SOCIAL PROCESS AUDIT

The aim of the social process audit is to develop an internal management information system that will allow management to create and administer the social programmes in a better way. This involves the determination of the objective of the social programmes and the social cost benefit analysis of the programmes.

2. Financial Statement Format Audit

Under the financial statement format audit, the social information is presented in conventional financial statement format i.e. balance sheet and income statement.

3. Macro-Micro Social Indicator Audit

This attempts to evaluate the micro indicators(i.e. companys performance) against a set of macro indicators such as national policies.

4. Constituency Group Audit

Under this audit, the preference and attitude of various constituencies like employees, creditors, suppliers etc. are identified and measured and the firms performance is evaluated against the criteria developed for each group.

5. Partial Social Audit

It evaluates any particular aspects of social performance like energy conservation or ecological preservation.

1) Social audit enables the company to take close look at itself and understand how far the company has lived up to its social objectives. 2) Social audit encourages greater concern for social performance throughout the organization. 3) Social audit provides data for comparing effectiveness of the different types of programmes. 4) Social audit provides information for effective response to external claimants that make demands on the organization. 5) Social audit provides cost data on social programmes so that management can relate the data to budgets, available resources, company objectives and projected benefits of programmes.

1) Being a relatively new concept, social audit is yet to gain wide appreciation and acceptance. 2) Being a relatively new concept , a clear and generally well accepted methodology for conducting the social audit is not available. 3) There is no agreement as to the items to be included for social audit. 4) It is very difficult , and in several cases even impossible , to quantify the social costs and benefits of different activities or items. 5) There may be resistance with in the company to social audit because of the time , effort and difficulty involved in task. 6) There may also be resistance because of the fear of unsatisfactory picture that may be presented by the social audit.