C.P.A AFR: Social accounting
ADVANCED FINANCIAL REPORTING
Social accounting
Social accounting (also known as social accounting and auditing, social accountability, social and environmental accounting, corporate social reporting, corporate social responsibility reporting, non-financial reporting or accounting) is the process of communicating the social and environmental effects of organizations’ economic actions to particular interest groups within society and to society at large.
Social accounting is commonly used in the context of business, or corporate social responsibility (CSR), although any organisation, including NGOs, charities, and government agencies may engage in social accounting. Social Accounting can also be used in conjunction with community-based monitoring (CBM).
Social accounting emphasises the notion of corporate accountability. D. Crowther defines social accounting in this sense as “an approach to reporting a firm’s activities which stresses the need for the identification of socially relevant behaviour, the determination of those to whom the company is accountable for its social performance and the development of appropriate measures and reporting techniques.It is an important step in helping companies independently develop CSR programs which are shown to be much more effective than government mandated CSR.
Social accounting is often used as an umbrella term to describe a broad field of research and practice. The use of more narrow terms to express a specific interest is thus not uncommon. Environmental accounting may e.g. specifically refer to the research or practice of accounting for an organisation’s impact on the natural environment. Sustainability accounting is often used to express the measuring and the quantitative analysis of social and economic sustainability. National accounting is a narrower usage in concentrating on the nation as the aggregable unit of analysis and economics as a method of analysis.
Purpose of social accounting
Social accounting, a largely normative concept, seeks to broaden the scope of accounting in the sense that it should:
- concern itself with more than only economic events;
- not be exclusively expressed in financial terms;
- be accountable to a broader group of stakeholders;
- broaden its purpose beyond reporting financial success.
Benefits Social accounting
Society is seen to profit from implementing a social and environmental approach to accounting in a number of ways, e.g.:
- Honoring stakeholders’ rights of information;
- Balancing corporate power with corporate responsibility;
- Increasing transparency of corporate activity;
- Identifying social and environmental costs of economic success.
Benefits to the entity
Management control
Social accounting for the purpose of management control is designed to support and facilitate the achievement of an organization’s own objectives.
Because social accounting is concerned with substantial self-reporting on a systemic level, individual reports are often referred to as social audits. The first complete internal model for social accounting and audit, 1981, was designed for social enterprises to help plan and measure their social, environmental and financial progress towards achieving their planned objectives.
Organizations are seen to benefit from implementing social accounting practices in a number of ways, e.g.
- Increased information for decision-making;
- Enhanced image management and Public Relations;
- Identification of social responsibilities;
- Identification of market development opportunities;
- Maintaining legitimacy.
