This document provides an overview of social auditing and corporate responsibility. It discusses the brief history of corporate responsibility programs and how they have developed over time. It then explains the key principles, criteria, and process involved in social auditing for corporations. The document emphasizes that determining material issues and prioritizing them is an important part of social auditing.

1. Social Auditing for
Corporate Responsibility
A Presentation to the
Human Resources Association of New Brunswick
amec.com

2. Presentation Outline
Brief history of corporate responsibility
Development of CR programs
Social auditing
Principles
Criteria
Process
Transitioning to social auditing
2

3. 3 Elements of Sustainable Development
Three balanced objectives
The concept of sustainable
development combines three
LIVEABLE objectives :
ENVIRONMENT SOCIAL Economic Effectiveness
SUSTAINABLE
Social Justice
Environmental Protection
FAIR
VIABLE and means for achieving them
which fall within the province
of governance and
management.
ECONOMIC
3

4. Different Name – Same Job
Corporate Social Responsibility Initially, the social dimension
Corporate Responsibility of sustainable development
Corporate Citizenship received less attention than
Sustainability the environment and only in
Social, Ethical and Environmental recent years have social
Responsibility aspects become more
prominent
Sustainable Development
Triple Bottom Line
SD has evolved to encompass ideas of: good governance including
transparency and accountability; inclusiveness and stakeholder
perspective, particularly in relation to those who are most vulnerable.
4

5. Corporate Responsibility – Some History
1916 – John Maurice Clark (Economist)
"if men are responsible for the known results of their actions, business
responsibilities must include the known results of business dealings,
whether these have been recognised by law or not."
1930s – Theodore Kreps (Stanford Professor)
Introduced the subject of Business and Social Welfare
First to use the term “social audit”
1942 – Peter Drucker (Writer, Management Consultant)
Argued that companies have a social dimension as well as an economic
purpose in his book, “The Future of Industrial Man.”
1953 – Howard Bowen (Economist, University of Iowa President)
Defined corporate social responsibilities as "the obligations of businessmen
to pursue those policies, to make those decisions, or to follow those lines of
action which are desirable in terms of the objectives and values of our
society."
5

6. Opposition to the Notion that
Companies have Social Responsibilities
In 1962, Milton Friedman, in “Capitalism and Freedom,” stated
“Few trends could so thoroughly undermine the very foundations of
our free society as the acceptance by corporate officials of a social
responsibility other than to make as much money for their
stockholders as possible.”
“There is one and only one social responsibility of business – to use
its resources and engage in activities designed to increase its profits
so long as it stays within the rules of the game, which is to say
engages in free and open competition without deception or fraud.”
6

7. Visionary Thinking
1919 – George Eastman, founder of Kodak
Gave one-third of his own holdings of company to his employees and
later fulfilled what he felt was a responsibility to employees with the
establishment of retirement annuity, life insurance, and disability
benefit plans. He fostered music, endowed learning, scientific
research and teaching, promoted health, helping the needy and made
his own city a centre of the arts.
The Old Age Pension Act was passed in Canada in 1927
Social Security Legislation was passed in the US in 1935
Private Pension Funds not regulated in the US until 1974
7

8. Visionary Thinking
1930 – David Packard, co-founder of Hewlett Packard
“I think many people assume, wrongly, that a company exists simply
to make money. While this is an important result of a company’s
existence, we have to go deeper and find the real reasons for our
being. As we investigate this, we inevitably come to the conclusion
that a group of people get together and exist as an institution that we
call a company so that they are able to accomplish something
collectively that they could not accomplish separately – they make a
contribution to society, a phrase which sounds trite but is
fundamental.”
8

9. Social Responsibility Model
1991 – Archie Carroll
Proposed a model that contains
the four categories of corporate
responsibility in decreasing order
of importance:
1. Economic - be profitable
2. Legal - obey the law
3. Ethical - do what is right and fair
and avoid harm
4. Discretional / philanthropic - be a
good corporate citizen
Thought to reflect the evolution of
business and society interaction
9

10. Realizing the problems
At the present moment, do we have these
3 elements in balance?
Social
Environmental How do we know?
Economic
10

11. Typical CR Performance Indicators
Environmental Performance Social Performance
Energy Inputs Health & Safety
Workplace Diversity
Water Usage Labour / Management Relations
Effluent and Air Emissions Investment & Procurement Practices
Greenhouse Gas Emissions Business Ethics
Land & Ecosystem Use Indigenous Peoples
Product Life Cycle Reputation
Marketing Communications
Incidents & Non-compliances Customer Privacy
Economic Performance
Profit, Earnings & Income
Investment in Intellectual Capital
Employee Compensation
Indirect Economic Impacts
Customer Satisfaction
11

12. Steps to Implement a CR Strategy
Guiding
Guiding
1. Build the business case Principles for
Principles for
2. Pre-planning decisions Sustainability
Sustainability
__________
__________
3. Map out the implementation process __________
__________
4. Identify key issues and data - _____
_____
benchmarking
5. Stakeholder engagement Su
sta
6. Develop performance metrics Ch inabil
Stakeholder alle it
Response nge y
7. Collect information and data s
8. Communicate on progress Risk
Accountability
9. Verify and assure Management
10. Evaluate and evolve
Training &
Diversity Community
Investment
Health & Safety Environment Ethical conduct Employment
12

13. Materiality
Identification of key issues requires
an examination of materiality.
Materiality is determining the
relevance and significance of an
issue to an organization and its
stakeholders.
A material issue is an issue that will
influence the decisions, actions and
performance of an organization or
its stakeholders.
Drivers
Stakeholder response
Investor confidence
Business risk
13

14. The Materiality Test
It will be necessary to prioritize
issues, subject to periodic review
An emerging common approach is
to focus on…
Those issues that have significant
current or potential impact on the
company
Those issues that are of significant
concern to stakeholders
Those issues over which the
company has a reasonable degree
of control
14

15. Stakeholder Engagement
1. Identify the key stakeholders the Important considerations
sustainability program will engage
2. Determine the extent of How your company has identified
stakeholder engagement and at its key stakeholders
what stages How you solicit their input
a) Identification of issues
How their input is considered in the
b) Development performance
company’s decision-making
indicators
processes and in determining
c) Feedback on company
performance
material issues
d) Formal verification of company
performance
3. Undertake stakeholder
engagement at the appropriate
stages
15

16. Stakeholder Engagement
Engagement strategies
Stakeholder advisory panel
Expert advice
Surveys (internet, phone, mail-out)
Customer research
Community liaison committees
Tracking community / customer / supplier complaints
Focus groups
Local representatives
One-to-one
Road shows
Stakeholder
Public meetings or forums
Partnerships including alliances, collaborative projects, initiatives or ventures
16

17. Performance Indicators
Select appropriate and meaningful indicators
Factors that genuinely reflect the health of your business
How your business significantly impacts on society and the environment
Measures of performance, not just management processes
Ensure that selected indicators make sense to your business and your
stakeholders (materiality)
Linked to corporate policies
Performance trends
Sector benchmarking
Explain the shortfalls
Consider the Global Reporting Initiative (GRI) G3 Reporting Indicators
ISO 14031 ‘Environmental management – Environmental
performance evaluation – Guidelines’ can provide good information
17

18. Internal Auditing
Internal Audits typically examine:
Governance
Policies Governance
Roles and responsibilities
Report and review
Risk Management
Hazard / aspect analysis
Operational controls
Risk
Emergency response Control
Management
Control
Monitoring and measurement
Corrective action
18

19. In the Context of Sustainability…
Governance
What are the exposures for my organization?
How do we know? Do we engage the right people?
Are we providing guidance?
Risk Management
What processes exist to manage risk?
Is our evaluation current?
Control
How effective are the controls in our processes?
How confident are we in these controls?
When did we last check?
19

20. Social Auditing
What is now coming to be called Social Auditing is similar in many
ways to Financial Auditing except that it is about everything else that
an organization does apart from handling money.
Definition: a process that enables an organization to assess and
demonstrate its social, economic, and environmental benefits and
limitations. It is a way of measuring the extent to which an
organization lives up to the shared values and objectives it has
committed itself to.
20

21. Social Auditing
Provides an assessment of the impact of an organization' non-
s
financial objectives through systematically and regularly monitoring its
performance and the views of its stakeholders.
Requires the involvement of stakeholders…
employees, clients, volunteers, funding agencies, contractors, suppliers
and local residents interested in the organization.
Typically completed by the organization themselves and those directly
involved.
External verification of the social audit' accuracy and objectivity is often
s
necessary and could form part of the public disclosure process.
21

22. Why Social Audits?
To permit the enterprise to effectively monitor performance.
To permit the “stakeholders” in the enterprise affect its behaviour.
To allow enterprise to report on its achievements based on verified
evidence rather than on anecdote and unsubstantiated claims.
Permits those who invest in the enterprise and its stakeholders to
judge if it is achieving the values which it set out to achieve.
22

23. Social Auditing
Before a Social Audit can take place
you have to be clear about:
What you are trying to do as an
organization (objectives) – both
internally and externally
How you are going to do it (action
plans)
How you will measure and record the
extent to which you are doing it
(indicators)
23

24. Steps to Conduct a Social Audit
1. Assemble organization and secure agreement and commitment.
2. Define and prioritize the organization’s objectives and establish the
action it intends to perform to meet them.
3. Identify the organization’s “stakeholders.”
4. Agree upon indicators, information, benchmarks and targets.
5. Data gathering systems put in place (social accounting).
6. Collating, analyzing and interpreting results.
7. External verification process (second- or third-party).
8. Disclosure and act on results.
24

25. Social Accounting
Social accounting is a method to measure, analyze and present social
and society results.
The key concepts are
Account map: Table including the key social objectives and their
quantitative and qualitative indicators/measurements
Budget: Final set of measurements including the measurement plan with
time schedule and responsibilities. Indicators are always expressed so that
they allow performance to be measured.
Bookkeeping: Information to be gathered routinely during the year and
collection and filing of evidence (records).
Record: An evidence of a social event in social bookkeeping.
Social accounts: Analysis and summary of the past year’s social
bookkeeping.
Social audit: The process by which an external and independent party
reviews and checks the social bookkeeping and social accounts and
verifies the contents and interpretations presented.
25

26. Social Auditing Criteria
Social Accountability (SA) 8000
ISO/WD 26000
UN Global Compact
OECD Guidelines for Multinational Enterprises
Agenda 21
CERES
Bellagio Principles
Earth Charter
OECD Principles of Corporate Governance
Universal Declaration of Human Rights
Fairtrade Labelling Organization International Fairtrade Standards
ILO Indigenous and Tribal Peoples Convention
26

27. SA8000
An auditable certification standard based on International Labour Organization (ILO)
conventions, the UN’s Universal Declaration of Human Rights and the UN Convention
on the Rights of the Child
Elements of the Standard:
Child Labor
Forced Labor
Health and Safety
Freedom of Association and Right to Collective Bargaining
Discrimination
Discipline
Working Hours
Compensation
Management Systems
Applicability
Manufacturers and wholesalers/retailers with global supply chains
Option to certify to SA8000 by an accredited third party or membership in Corporate
Involvement Program (CIP)
27

28. ISO/DIS 26000
Guidance on Social Responsibility
Target date of publication – 2010
Guidance standard, not a requirements standard, therefore not possible to
become certified
Core Subjects of Social Responsibility that “should” be addressed by
organizations
– Community involvement and development
– Human rights
– Labour practices
– Fair operating practices
– Consumer issues
– The environment
28

29. Global Reporting Initiative (GRI)
Multi-stakeholder process and institution that has set out to
develop and promote a globally applicable framework for reporting
on sustainability issues.
The GRI guidelines set out reporting principles and specific
indicators to guide the development of sustainability reports for
companies and other organizations
Launched in 1997 by NGO Coalition for Environmentally
Responsible Economies (CERES) and the United Nations
Environment Program (UNEP) in order to develop a global
sustainable reporting framework.
Third version (G3) released
GRI framework is organized into five components: Vision and
Strategy, Organizational Profile, Governance, GRI Index and
Performance Indicators
29

30. GRI Application Levels
C C+ B B+ A A+
Report on Certain Report on All Report on All
G3 Profile Elements Elements Elements
Disclosures
Report Externally Assured
Report Externally Assured
Report Externally Assured
Required for
Required for Each
Mgmt Approach Not Required Each Indicator
Indicator Category
Disclosures Category
Report Core &
Report on 10+ Report on 20+ Sector
Performance
Indicators Indicators Supplement
Indicators
Indicators
30

31. A Measure of Social Performance
Organized by Canada’s leading
news publications
Employers are evaluated by the
editors of Canada' Top 100
s
Employers using eight criteria:
1. Physical Workplace;
2. Work Atmosphere & Social;
3. Health, Financial & Family Benefits;
4. Vacation & Time Off;
5. Employee Communications;
6. Performance Management;
7. Training & Skills Development; and
8. Community Involvement.
31

32. An Example from Planned Lifetime
Advocacy Network (PLAN)
Key Element Relationships are the heart of everything we do
Aspect of Key Consultation Based Data Based
Stakeholder Group
Element Indicators Indicators
Personal Networks Family members Lifetime Members Statistical profile of
are making a overall satisfaction networks
difference rating with networks Network records –
have long term goals
been met?
Overall satisfaction How happy are Members Staff turnover
with the quality of people at PLAN? Employees Facilitator turnover
relationships Increase in
membership
PLAN communicates Facilitators and Administrative Printed material
clearly on roles and members know what employees prepared for families,
relationships to expect from PLAN Facilitators focus people and
Focus People facilitators
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33. Transitioning to Sustainability Auditing
Audit Scope
Look at other policy commitments – health and safety, employment equity,
anti-harassment, information security, procurement
Increase stakeholder group – suppliers and customers, community, interest
groups, administrative departments, corporate and board level
management
Audit Criteria
If it cannot be defined within existing objectives and KPI’s, consider GRI G3
as an initial benchmark
Other standards
Audit Team
Involve non-operational personnel – HR, purchasing, IT, Sales
Audit Process
Cannot be done in a few days – data gathering process could be lengthy
33

34. Potential Issues
Social Auditing has excellent promise as a management tool but
some potential problems remain:
Reporting organization can deliberately limit audit scope in order to
avoid controversies.
Process can be managed internally to the disadvantage of some
external stakeholders.
Some significant stakeholders may be omitted.
Organization may use arbitrary or inappropriate indicators to evaluate
outcomes.
The standards, independence and honesty of the auditor may be open
to question.
34

35. Gaining Experience
The first auditing cycle will require a lot of work, but the subsequent
rounds are expected to be easier.
To facilitate the process, consider focusing on the following:
Ensure management’s long-term commitment.
Ensure adequate resources - required skills and enough time.
Plan the collection of information and storing of records well.
Make a timeline of bookkeeping and information collection and stick to it.
Start preparing the accounts already in the bookkeeping phase.
A summary version of the accounts can be a good way of communicating
the central findings in an interesting way to the stakeholders and the public.
Make observations and write down your experiences throughout the
process to make it easier to improve the next year’s process
35

36. Conclusions
Sustainability has to be defined by the organization before it can be
assessed
Management commitment is essential
Objectives, indicators and data gathering are essential elements
The sustainability audit process requires stakeholder engagement
The audit process will be longer and will require a different skill set
The audit should be considered an integral part of implementing a
sustainability program
36

37. Discussion…
Glenn Keays, MSC, CEA(SFM), EMS(LA)
Senior Consultant, Management Systems & Sustainability
glenn.keays@amec.com
506-450-0168