What Is a Corporate Social Audit?

Corporate social responsibility is a recent criterion that businesses have adopted as part of gauging whether they are performing to the best of their abilities. During the history of industry, companies were most concerned with a business’s financial performance, measured through indicators such as profits and stock market performance. However, companies have recently begun performing social audits to determine whether they are meeting their corporate social responsibilities to society as a whole as well as to their employees.

Adopting a socially responsible approach to business operations is good for a company’s brand. Increasingly, people are becoming worried about issues like the environment and the fair treatment of people. A socially responsible business puts into place programs that address these concerns and help make society a better place to live. By working to improve the environment and the treatment of people, companies project a positive image as they promote their brands.

Customers of a socially responsible business are engaged and have strong attachments to the brand. When they feel an attachment, customers are willing to pay more for a product, particularly if they know a portion of the profits is diverted to a worthy cause. While social responsibility cannot be measured in numbers directly, companies are likely to see increases in sales and profits as customers buy more of their products at a higher price point.

Social auditing is the prime tool by which companies evaluate whether they are in social compliance – meaning they are meeting their obligations to society and the community. A social audit examines whether a business is acting in a socially responsible way and if the company's economic activities align with environmental and human concerns. As long as a business’s practices do not violate human rights or environmental concerns, the company is in compliance.

The actual performance of an audit involves reviewing multiple aspects of a business’s behavior. The scope of the audit can be wide or narrow. At its broadest, an audit encompasses the following:

• Examining the environmental impact of company behaviors.
• Ensuring transparency in reporting issues that affect society as a whole.
• Maintaining financial transparency through proper accounting practices.
• Determining what actions are being used to improve the local community.
• Examining charitable donations and financial contributions to good causes.
• Creating volunteer programs that involve employees.
• Monitoring energy use throughout all stages of the company’s operations.
• Establishing a physically and mentally healthy work environment.
• Evaluating worker pay and benefits.
• Examining the diversity of the workforce, its nondiscriminatory policies, and employee opportunities for improvement.

Companies voluntarily undertake these kinds of audits in an attempt to be socially responsible. Federal laws govern a company’s employee practices and environmental behaviors, but socially responsible companies go beyond meeting the minimum requirements expected of them. These companies take extra steps to show that they are doing more than meeting their minimal obligations and instead are proactively trying to benefit society.

Companies demonstrate global corporate citizenship by being socially responsible, which is why the audit is so valuable. Auditing highlights areas where a company can improve its environmental efforts. Following auditing, a business may realize it needs to make changes to reduce its carbon footprint, for example.

Much of auditing focuses on what a company does that impacts the public, but an audit also benefits a company internally, particularly in the area of staff morale. Auditing may reveal ethical labor violations. Even if a company is in legal compliance, an audit may identify opportunities where it can improve its internal practices. This may lead to a more positive environment where employees are happier to work.