Social Accounting Practices in India as a Corporate Social Responsibility Essay Example

or sustainability accounting. Corporate social responsibility (CSR) promotes a vision of business accountability to a wide range of stakeholders, besides shareholders and investors. Key areas of concern are environmental protection and the wellbeing of employees, the community and civil society in general, both now and in the future.

Social accounting “is an important tool to measure the performance of any company in view of social responsibility. Corporate Social Responsibility of Indian companies: Corporate Social Responsibility Practices in India sets a realistic agenda of grassroots development through alliances and partnerships with sustainable development approaches. In any societal structure, we have multiple stakeholders, the one amongst others being the businesses represented by companies. These businesses meaningfully contribute to the state exchequer, impact their internal stakeholders and also generously support societal initiatives.

There are many instances where businesses have all along played an important role in addressing issues of education, health, environment and livelihoods through their corporate social responsibility interventions in various parts of the country. Some of these interventions are now also available as innovative practices. Corporate Social Responsibility (CSR) defined as “the ethical behavior of a company towards the society,” manifests itself in the form of such noble programs initiated by for-profit organizations.

CSR has become increasingly prominent in the Indian corporate scenario because organizations have realized that besides growing their businesses it is also vital to build trustworthy and sustainable relationships with the community at large. This is one of the key drivers of CSR programs. Though India is one of the fastest growing economies, socio-economic problems like poverty, illiteracy, lack of healthcare etc. are still ubiquitous and the government has limited

resources to tackle these challenges. This scenario has opened up several areas for businesses to contribute towards social development.

This is the reason to adopt CSR in India. The Corporate Social Responsibilities of Indian companies’ are- to be transparent with the society, to be ethical and to act legally. CSR is not a new concept in India. Corporate like the Tata Group, the Aditya Birla Group, and Indian Oil Corporation, to name a few, have been involved in serving the community ever since their inception. Many other organizations have been doing their part for the society through donations and charity events. Even many firms do beyond charity. For example, organizations like Bharat Petroleum Corporation

Limited, Maruti Suzuki India Limited, and Hindustan Unilever Limited, adopt villages where they focus on holistic development. They provide better medical and sanitation facilities, build schools and houses, and help the villagers become self-reliant by teaching them vocational and business skills. Social accounting is also a corporate social responsibility, but it is adopted by only few firms in India. Social Accounting practices in India: France, UK and USA are the top countries where social responsibility statements are made with other financial statements. But in India still it is not so popular.

Social accounting is a corporate social responsibility of organizations. In the corporate world, genuine social accounting has been one of the first major stepping stones in improvements in corporate social responsibility. For many corporate that embark on the process, it is the first time that serious attempts have been made to go beyond financial measurements and understand the social (& often environmental) impact that the organisation has

on its stakeholders. Many business organizations in India have also contributed greatly in the area of social responsibility.

Associated cement companies (ACC) has been rendering social service for over four decades. The company has set up the schools, health centers, bunds, local countryside and agro- based industries, and cooperative societies in village with the sole objective of providing employment and improving the quality of rural life. Following help from ACC, farmers in Andhra Pradesh have doubled their per acre yield of rice, whereas those in Bihar began to raise a crop of protein- rich soyabeans as a matter of routine. ACC is spending approximately Rs. lakh annually on its staff which works for rural development programmes with direct investment.

The Mafatlal Group follows a slightly different line in social performance. It spends a huge fund on rural welfare programmes for helping the poor. It constructs homes for the homeless, provides drinking water, and distributes book, stationery and scholarships in rural areas. The Tata Iron and Steel Company is the first industrial organization in the country to have carried out a social audit of its performance in the year 1979.

In the public sector, Bharat Heavy Electrical Ltd. BHEL) is endeavoring to play a prominent role in the area of social responsibility. All division of BHEL, are aware of their social role and have drawn comprehensive scheme for the welfare of their employees in social role and have drawn comprehensive scheme for the welfare of their employees in township and for those living in nearby areas. The company is engaged in identifying specific problems of communities and in coordinating the efforts with the

local bodies, authorities and voluntary agencies in providing speedy relief to them.

The active involvement of BHEL and its employees in the welfare of the surrounding communities is helping the organization to earn the goodwill of the local population and to have a better understanding of their problems. Jobs done by BHEL units in this respect include provision of drinking water facilities, construction of external sewers, roads and culverts, providing health facilities, improving the quality of life by redesigning jobs, improving educational facilities and so-on.

Advantages of Social Accounting practices as a corporate social responsibility: As social accounting examines the social, environmental and economic performance and impact of an organisation, it can offer an organisation a method for obtaining a holistic and regular process of examining both how it is doing (performance) and what its effects are on people, communities, and the environment (impact). There are several advantages of social accounting as a corporate social responsibility.

Social accounting provides an ongoing record of how organization or enterprise has developed and changed over time. • It gives feedback on how things are going from the range of people involved in the organization or enterprise. • It helps to identify the areas where things are working well and not so well and this information helps to continue the work or make improvements to change what’s not working so well. • It helps to know how well organization is achieving its aims and values. • It helps to keep a record of what the organization or enterprise is doing and the sorts of impacts it is having.

Customers, service users, or clients can be

involved with the social accounting process and thereby feed their perspectives into the organization’s planning and measurement process. These individuals or groups can also request/ read social accounts to know more about organisation. • Social accounting can feed into strategic planning, as it offers an organisation the ability to systematically review its strengths and areas for improvement. • Organisations have a great deal of flexibility within the framework.

They may go through the process in different ways, and report on the process differently, tailoring it to fit their needs and requirements. An organisation can choose to report on any indicators that it sees fit, thereby making it possible to fit many ‘proving and improving’ tools within the framework, including quality systems or indicators of impact that are required by purchasers, funders, or lenders. • There is flexibility in the time scale for completing the process and in building up to a comprehensive set of accounts.

The full process can be done in stages over two or more years if the organisation focuses on different aspects of its activities or objectives in each year. This is only recommended if the whole picture will be complete within a reasonable timeframe. • The external validation process can be an important reality check on the information the organisation has gathered. • Having a verified and comprehensive statement of the organization’s impact and performance can help in reporting to funders/investors, reporting to stakeholders and in compiling annual reports • It helps to improve company’s financial performance.

It enhances brand image and reputation of the company. • It helps the corporate for charitable contribution to the society. •

It is a sort of corporate involvement in community education, employment and homelessness programmes. Issues related with social accounting practices: • Transparency Fundamental to social accounting is the concept of accountability, aided through increased transparency. Few of the established methods of evaluating project or programme success include transparency of results as a primary concern. • Compliance or improvement

One of the most positive features of social accounting is that it encourages change within the organisation. Earlier concepts of social audit involved an external organisation making an assessment of social performance and providing a report on the company. Social accounting tends to foster an improvement rather than compliance based mentality to impact assessment and so should lead to ownership and ongoing improvement in the organisation. • Scope It is important to note that social accounting has an organizational, rather than project level scope.

Thus stakeholders judge an organisation on their overall perceptions rather than a narrow view of project success or failure. However, one of the issues of social accounting, as with impact assessment, is the level at which stakeholder dialogue can be carried out by the organisation. • Social Accounting is not impact assessment Social accounting, through the AA1000 process standards, provides a comprehensive and systematic framework for accounting, auditing and reporting against an organization’s social objectives. The discipline of social accounting encourages any organisation to take impact assessment more seriously.

It encourages management information systems to be developed and embedded in the organisation to provide ongoing monitoring and learning from programme activities. It encourages the integration of social objectives into strategic planning. The reporting of the social accounts, especially if done

annually, focuses the mind on what level of impact assessment has been carried out during the year. • Social Accounting uses participatory methods Social accounting provides an ideal way to combine participatory methods of indicator setting with ongoing qualitative data collection.

Challenges faced by the companies: Indian companies face number of challenges to adopt social accounting practice as their corporate social responsibility. Like:- • Lack of awareness about corporate social responsibility. • Lack of knowledge about social accounting and its benefits. • Lack of interest of the employees of the organization. • Lack of interaction between society and organizations • A key challenge facing business is the need for more reliable indicators of progress in the field of CSR, along with the dissemination of CSR strategies. • The shrinking role of government.

Conclusion: CSR has come a long way in India. From responsive activities to sustainable initiatives, corporates have clearly exhibited their ability to make a significant difference in the society and improve the overall quality of life. In the current social situation in India, it is difficult for one single entity to bring about change, as the scale is enormous. Corporates have the expertise, strategic thinking, manpower and money to facilitate extensive social change. Effective partnerships between corporates, NGOs and the government will place India’s social development on a faster track.

Many Indian companies have given ‘Value Added Statement’ in their annual reports in place of a social reporting. This statement exhibit the contribution and surplus made by them through their business activities and also disclosure as to how the same has been distributed to different segment of the society such

as employees, government and shareholders, etc. Beside, Social Income Statement and Social Balance Sheet given by some Indian companies in their annual reports would prove very useful to the users and other interested persons.

The government should make it obligatory on the part of the companies to report their ‘Social Performance’ during the year through statements and/or other means of disclosure According to me, the benefits of the methodology are numerous, including not just an increase in transparency and accountability, but also the development of a focus on organizational learning, the embedding of organizational information systems and the systematic improvement of stakeholder dialogue. Every organization must adopt social accounting as their corporate social responsibility.