Social and environmental auditing should be compulsory for all businesses
All businesses are held responsible for their actions related to their functioning. Not only is their accountability financial in nature, but it is also social as well as environmental. The reason stands that business is involved not just within its financial sphere, but it also has a significant impact on its society and social dimensions as well as the environment which is directly in contact with the activities of the business. (ACCA, 2015). The need for social and environmental auditing is not a new phenomenon rather it has been around since the 1980s. It was when the International Chamber of Commerce (ICC) decided to conduct audits as per the destructive effects that the businesses were having on the environment. (Schlegelmilch, 1998). The huge number of mining, chemical and manufacturing industries lead to harmful effects on the environment and society as a whole. Therefore, conducting the social and environmental audit should be compulsory for all businesses.
A social audit is described as an official review of the company’s responsibilities, socially. These social responsibilities relate to the kind of relationship that a business shares with the society, in terms of its positivity and negativity. As per the directives from the International Organization for Standardization (ISO), this is the relation between the society and the environment which is important for the business if it needs to flourish and to operate effectively. Thus, it ascertains the potential and overall performance of the organization. (INTOSAI, 2013). It is better for the company to take up and recognize its social responsibility by itself rather than as a rule that needs to be followed by the government because it will help to develop a more responsible and positive image upon the rest of the world that a company is taking care of the aspects that its business affects. Therefore, a social audit is carried out to determine some of the factors that the company is supposed to be in touch with such as any kind of charitable work that is being carried out by the company, any kind of volunteer activity, the energy use by the company, the working environment, and conditions as well as the transparency in its work. Social audits also encompass the transparency of the work, the conditions of the workers and the environment they are working in and any kind of benefits they are being provided alongside the wages they are being given. (Basu, 2010).
Social audits are basically performed to discover whether the company fulfills the criteria to be working on a humanitarian basis and provides all those who are in access to it, with the proper benefits and facilities that render the workplace safe and dependable. The reason for this is that many companies often work in an unethical manner where they fail to keep the workers and the work environment satisfactory. This is a threat to society, and it is also a major source of corruption and disorder. A company can carry out social audits and release the results publicly, or they can be disclosed internally as well, as long as there are no governmental obligations upon the organization. (INTOSAI, 2013
As the name relates, environmental auditing is important for business because it relates to the environmental impact of the business on the environment and surrounding. Today, the major problem related to factories and businesses is that of pollution. Air pollution and water pollution are direct outcomes of effluents released by factories which are not disposed of properly, and they pollute the air and water bodies. (Schlegelmilch, 1998). Therefore, safety measures need to be taken by companies, and they need to adhere to these in order to keep the environment safe. Therefore, an environmental audit will include the energy consumption by the business and the alternative source/ renewable sources of energy being used. This audit also takes into account the water consumption, water wastage, and water reservation by the company. Moreover most importantly, carbon emission by the business is also kept in check through environmental audits. (Owusu and Frimpong, 2012). It also helps to check the amount of recycling being done by the company in order to reduce waste production and to help preserve the natural resources at the same time. Businesses also need to be checked for the amount of product they are producing; whether it is being produced in excess or it is sufficient enough to prevent any kind of product waste at the end. (Schlegelmilch, 1998).
Meanwhile, environmental auditing also helps to keep a check over biodiversity and the kind of influence the business activities have on the various species, habitats and the overall ecosystem and its delicate balance. (Gray, 2000).
Here are several reasons other than these because of which auditors perform social and environmental audits for businesses. One major reason is regulatory as businesses need to be in compliance with the rules for the economic auditing and the finances of the companies. Moreover, auditors cannot carry out their audits perfectly without keeping the social and environmental audits in check. Also, the company needs to meet the needs of the many stakeholders that it is in contact with. This is done to provide assurance to them so that they can feel safe about their investment and that their business is going free of any hassle. Moreover, the State is acquainted with the social responsibilities of the business, and if it does a satisfactory job, then it can be held as a role model for other businesses. (Owusu and Frimpong, 2012).
Conclusively, it can be said that social and environmental auditing should be compulsory for businesses because it helps to determine and identify the social and environmental responsibility of the company. Social auditing is important to understand whether the social parameters are being fulfilled, and there is transparency in the operatives of the company. On the other hand, environmental audits help to reveal the environmental impact of the company and determine the extent of its impact. Altogether, they help to determine if the business is working on ethical boundaries and is safe for the society and the environment.
References
ACCA. 2015. Risk and environmental auditing. Available from <
http://www.accaglobal.com/us/en/student/exam-support-resources/professional-exams-study-resources/p1/technical-articles/risk-and-environmental-auditing.html> Accessed 9 Mar 2016.
Basu. 2010. Fundamentals of Auditing. 7-14.
Gray, Rob. 2000. Current Developments and Trends in Social and Environmental Auditing,
Reporting & Attestation: A Personal Perspective. Center for Social and Environmental Accounting Research. Available from < https://www.st-andrews.ac.uk/media/csear/discussion-papers/CSEAR_dps-socenv-curdev.pdf> Accessed 9 Mar 2016.
INTOSAI. 2013. Sustainability Reporting: Concepts, Frameworks and the Role of Supreme Audit
Institutions. Available from < http://www.environmental-auditing.org/LinkClick.aspx?fileticket=vM4hrHlBd0s%3D&tabid=128&mid=568> Accessed 9 Mar 2016.
Owusu, Antwi, Charles and Frimpong, Saiw. 2012. Corporate Social and Environmental
Auditing: Perceived Responsibility or Regulatory Requirement? Research Journal of Finance and Accounting. Vol3, No. 4. Available from <http://www.iiste.org/Journals/index.php/RJFA/article/viewFile/1803/1756> Accessed 9 Mar 2016.
Schlegelmilch, B. Bodo. 1998. Marketing Ethics: An International Perspective. 448-454.
Available from <https://books.google.com.uk/books?id=xiZ27l3uhnUC&pg=PA454&dq=social+and+environmental+audit&hl=en&sa=X&ved=0ahUKEwiuqfSfn7TLAhWBv44KHe1FAF0Q6AEILDAC#v=onepage&q=social%20and%20environmental%20audit&f=false> Accessed 9 Mar 2016.
