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Social Accounting

Background

The biggest exponent of social accounting within the accountancy profession in the UK is the Association of Chartered Certified Accountants (ACCA). The ACCA has an entire section on their Web site called Sustainability devoted to this topic.

The ACCA helps us to realise that the world of accounting is changing as non-accountants get more and more involved in it. The ACCA points out that the food industry is facing problems because there are people who accuse them of ignoring health issues because of the sugars, salt and fat that producers are putting in their products. Similarly, the accounting scandals at Enron, World Com and Ahold have made accountants and non-accountants alike appreciate that every industry and profession needs to look at the way it works.

What can organisations do in terms of social accounting: what does it mean?

A lot of businesses are regularly publishing social accounting reports now. For example:

  • Diageo and BP both publish statements of their community involvement: what they do, where they do it and how they compare with other companies in this area.
  • The Body Shop undertakes an audit of its social, environmental and animal testing performance: social or ethical auditing.
  • The Co-op is at the forefront of social corporate awareness and they regularly publish financial data relating to the various stakeholder groups as they have an impact on social activities.

Task

The Business in the Community (BITC) Web site reports on some of Diageo's community involvement activities:

  • Visit the BITC site and find how many employees Diageo has and make a list of six of their most famous products.
  • How does Diageo work at helping to find solutions to unemployment problems?
  • What do you think they mean when they say, 'The executive owner of corporate citizenship is Diageo's Chief Executive'?
  • Diageo seems proud of the leading role it takes in discussing and acting on alcohol and society. Find out from the Diageo Web site what they are doing in this area. Start at their Values and Policies section.

The Body Shop has always campaigned for greater social awareness and its Web site reflects that campaign. Visit the Our Values section of their Web site and make a note of their values under each of the following headings:

  • Against animal testing
  • Support community trade
  • Activate self esteem
  • Defend human rights
  • Protect our planet

How do you think these issues might have an impact on the financial reports of The Body Shop?

Social accounting really started in the 1970s as pressure groups began their work on opening up the boardrooms of big business. Based on the initial success that the 1970s brought, the environmental lobby then began their own pressure campaigns in the 1980s. Things have now developed to such a stage where we now find it difficult to define what might be meant by social accounting. After all, we have already seen, just by looking at Diageo and The Body Shop, that the work done in this area is very varied.

Let's look at the various aspects of accounting and reporting that we would probably all agree to include under the heading of social accounting. Let's begin with corporate social responsibility (CSR). That will lead us to discuss what is called the FTSE4 Good Stock Market Index. After that we will consider the work of the Institute of Social and Ethical Accountability and finally we will look at several examples of who is doing what as they seek to account more socially.

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