Social Audit

(d) Social Audit

Definition. Social Audit evaluates an organisation's performance in terms of its social responsibilities and impact on society, the environment, and its wider stakeholders — as distinct from its purely financial performance. In the current Indian statutory context, it connects directly to two concrete mechanisms: Corporate Social Responsibility (CSR) reporting/spending under Section 135 of the Companies Act, 2013 (for prescribed companies), and the mandatory, grassroots-level social audit of government welfare schemes such as MGNREGA, where beneficiary communities themselves participate in verifying that the scheme's funds were genuinely spent on the intended work.

Objectives:

• To assess the organisation's genuine contribution to social welfare — employment generation, environmental protection, community development, and similar impact.
• To verify that CSR funds or public welfare-scheme funds have actually been utilised for their stated, intended purpose.
• To measure, as far as possible, the social cost and social benefit an organisation's activities generate.
• To build public trust and transparency around an organisation's non-financial impact, over and above its financial statements.

Advantages:

1. Builds goodwill and public trust in the organisation among the communities it affects.
2. Ensures genuine accountability for CSR funds and public welfare-scheme money.
3. Encourages socially responsible business conduct, since organisations know their social claims will be independently checked.
4. Gives a direct voice to stakeholders — local communities, scheme beneficiaries, employees — who have no formal say in a purely financial audit conducted for shareholders.

Limitations:

1. There is no universally accepted method to convert social costs and benefits into a single, comparable monetary figure.
2. Outside the mandatory CSR-reporting context, social audit in general corporate practice remains largely voluntary and qualitative.
3. Findings can be subjective and are harder to independently verify than a strictly financial figure.
4. Still a comparatively young and evolving discipline in India, compared to the long-established practice of financial audit.