What Is a Corporate Social Audit? (Plus Why It's Important)
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A corporate social audit helps a company learn if it's meeting its social responsibility goals. Some elements that a corporate social audit measures include a company's resource consumption and the diversity of its staff. Understanding what a corporate social audit is can help a business owner ensure their company operates responsibly.
In this article, we define what a corporate social audit is, what its benefits are and what this assessment examines.
What is a corporate social audit?
A corporate social audit is an evaluation of how well a company's economic growth benefits society. It gauges measurable objectives that help a company meet the expectations of its stakeholder groups for how it should operate. A company can use the results of a corporate social audit to maintain and improve its business performance while prioritizing its social responsibility.
Why is a corporate social audit important?
A corporate social audit is important because it can increase a company's responsibilities to the community. This assessment holds businesses accountable and ensures they only engage in practices that benefit stakeholders who aren't necessarily shareholders, like employees, customers and business partners.
Since the concept of corporate social responsibility originated in the mid-1900s, it has grown to include environmental responsibilities as well. This element of a corporate social audit can ensure that companies don't overuse resources and inflict unnecessary harm on the environment.
What does a corporate social audit examine?
A corporate social audit examines the following elements of a company:
Transparency with financial and accounting practices
A corporate social audit can determine how transparent a company is with its financial and accounting practices. It ensures that all staff members report information accurately and that the company files its taxes according to state and federal regulations. It also ensures that the company shares as much financial information as possible with the public in the form of financial reports.
Transparency with product defects or other issues
A corporate social audit reports if a company has been transparent with any issues in its products or other offerings. For example, imagine a consumer goods company unknowingly sold a laundry detergent that contained harmful phosphates. If the company recalled the product, issued a public apology and distributed proper compensation after realizing the error, it may still receive a satisfactory audit because of its transparency.
Fair hiring practices and employee treatment
A corporate social audit can also determine if a company participates in fair hiring practices. This can include hiring employees without discriminating against them because of their gender, race, sexuality, religion any other basis. It can also include making reasonable accommodations for potential employees with disabilities and giving them a fair chance to secure available positions.
This audit may also assess how fairly a company treats its employees. It can check if a company offers benefits and pays employees equally for the responsibilities they have. It may also assess a company's promotion practices to ensure that current employees receive equitable opportunities to advance within the organization.
Participation in charitable giving
A corporate social audit assesses how much a company participates in charitable giving. The audit may evaluate what percentage of its profits it donates to worthy causes. It may also check to see if the company offers incentives for its employees to volunteer, like offering a paid day off of work to volunteer at a local food bank or another organization.
Sensible resource consumption
Another aspect that a corporate social audit may check is a company's resource consumption. This can include its energy bills and the waste it produces. If a company implements measures to minimize its environmental footprint, it can receive more positive results in its audit.
What are the benefits of a corporate social audit?
Here are some of the benefits of a corporate social audit:
It can help a company identify new business opportunities
A corporate social audit may reveal new business opportunities for a company. A company might be able to keep selling its current products or services and add new ones to better meet the community's needs. A company may also decide to switch its current offerings for more sustainable ones that can better fulfill the public's demands.
It can help a company attract and retain talented employees
A corporate social audit may reveal that a company's workforce isn't diverse enough. It can use this information to refine its hiring practices and become a more inclusive place to work. Once a company can perfect its hiring practices by analyzing the results of its corporate social audit, it may be able to attract and retain talented employees. Employees may view the company as a desirable place to work and have more incentive to apply. Current employees may also be less likely to seek new job opportunities if they're a part of an inclusive company.
It can help a company access financing opportunities
A company may not have the capital it needs to pursue additional ventures. A company can use the results of a corporate social audit to make itself eligible for financing opportunities. Investors and lenders may be more likely to support a company that's known for its responsible, ethical practices.
It can help a business improve its reputation
A corporate social audit may help a company build its reputation within the community. It can improve its brand recognition among members of its target audience and become a reputable, trusted business. Customers may be more willing to conduct business with companies that take their social responsibility objectives seriously.
It can increase cost savings
Implementing the results of a corporate social audit can help a company increase its cost savings. For example, a company may discover ways to minimize waste production, reduce emissions and lower its resource use. The company can use the savings it creates to invest in other socially responsible endeavors that can lead to even greater savings in the long term.
It can improve international relations
A business may use the findings from a corporate social audit to improve its international relations. This can include attracting overseas clients and gaining an advantage over its competitors. A company can also improve its relationships with suppliers, which can make navigating regulatory burdens much easier.
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