The art of making social impact interesting…

Lots of people have heard of ‘social accounting and audit’ but they are not sure what it actually is and what it entails.  Rumour often has it that it is complicated and involved.  However, I would argue that it actually is quite simple…

…you re-assert what you, as an organisation, aims to do and how whilst at the same time identifying who you are working with and for;

…you collect information – both quantitative and qualitative – to see if you are meeting your overall purpose;

…you bring all that information together, usually (but not always), into a report; and then…

…you get it independently checked to provide the report with integrity.

Thus, four easy and simple steps with the last one being the ‘audit’.

I believe that there is no getting away from having to apply the first three steps.  In the last few years there are an increasing number of people and institutions reformulating these steps in different ways – adding to what seems like a confusing plethora of different approaches.  The contrary is the case – they are all very similar and all maintain the three steps albeit dressed up in slightly different packages.

In introducing some form of social impact assessment into your organisation, be conscious of where it is ‘located’ within your organisation.  Often organisations will tack it on as an additional activity as can be seen in the diagram on the left – an add-on that may persuade funders to continue to support the organisation.

Embed diagram

The real trick – and the thing that makes a difference in adopting an integrated social impact process, is to try and ‘locate’ social impact at the core of the organisation as in the diagram on the right.  This will mean that social impact assessment is an integral part of what you actually do.  This can then contribute hugely to planning, reporting, as well as decision-making – it can have multiple uses.

Moving social impact into the centre or your organisation requires a bit of thought and planning but it means that the process of collecting data becomes part of what you do and not seen as an ‘extra’ to what you do.  In many ways this relates to the way we learn which is epitomised by the Kolb Cycle (see diagram below) where we bring forward a concept, test it out, experience the change, then reflect on that experience and this leads back into new forming new concepts.  Social impact for organisations resides in the reflective part of the cycle.

Kolb's Experiential Learning Model

So far I have tried to show the process of social impact and where that process lies within an organisation that is trying to make social change.  But why would we want to do it?  For me it is really about seeing if you, as an organisation, are really making a difference.  And if you are, can you prove it and thus can you improve as a more effective organisation.

Within the world of social impact there is a lot written about measurement.  What cannot be measured easily is often ignored – but many of the social changes that an organisation with a central social purpose aspires to achieve, are difficult – if not nearly impossible to measure.

So should we be trying to measure them at all?  For the purposes of assessing the social impact you are making, is it not sufficient to assess as fairly as possible whether or not you are making a difference and to what degree?

Back in the 1970s I remember reading Zen and the Art of Motorcycle Maintenance.  Many people had it stuffed in their corduroy jacket pockets to take it out to impress people on trains and such like.  Despite using it as an accessory, it is an amazing book and much of it is about how we understand quality.  This is not an easy thing to do and the book illustrates how we seem to understand quality without being able to measure it – just like many things in life that we truly value. An illustrative quote typical to the book is…

Quality… you know what it is, yet you don’t know what it is.  But that is self-contradictory.  But some things are better than others, that is they have more quality.  But when you try to say what the quality is…it all goes poof!

So this leads us on to reporting your social impact – not only on the quantitative data which is relatively easy to understand – but also how to consider the qualitative data.  In the social accounting and audit process there is a recommendation to collect qualitative opinion and views from several different stakeholder groups.  This multi-perspective approach (which in academia is referred to as triangulation) means that if you are more or less getting the same sorts of views from different groups’ perspectives then you can be reasonably sure you are getting closer to the truth.

Let’s go back to the original title of this blog. How can we make social impact, not only more relevant by placing it at the core of the organisation, but also interesting to do and interesting for participating stakeholders?

I was recently involved in supporting the GENERATION Co-production programme and helped them keep social accounts on their outcomes.  This outreach programme worked with five separate arts projects across Scotland – all of them exposing young people actively to the creative arts.  The programme lasted almost two years and what was really interesting was that the social accounting process used the medium of art itself in collecting qualitative information from the young participants.  Instead of the traditional questionnaires/interviews/events/etc., young people were invited to draw pictures and ‘storyboards’ of their experiences.  They were then filmed telling their stories and all the information was put up onto a website.

This illustrates how the consultation with stakeholders can be integrated into the core of what the organisation is trying to do.  Similarly, different types or organisation can find ways to integrate the consultation process into the delivery of their initiative.  It is not outside the bounds of possibility for nurseries and schools to have evaluative games, for those holding training or events to have dialogue sessions on assessing change, for sports clubs to have physical challenges in obtaining feedback and so on.

This thinking and subsequent implementation means that the social impact process becomes part of what you do and not just an add-on.

At the end of the GENERATION Co-production programme the social accounts were, however, written up in a more traditional report form but they drew on the information collected on the website.  Both the final detailed report and the illustrative summary will be publicly available soon.

In conclusion, in working to encourage organisations to adopt a social impact framework we have to encourage them to pull the process of social impact into the centre of the organisation – a crucial and integral part of what the organisation is actually trying to do.  At the same time organisations should explore how to consult on the quality of their services in a way that is appropriate to what they do…Eureka!

Alan Kay, Social Audit Network (SAN)

www.socialauditnetwork.org.uk

Understanding the principles and history of social accounting and audit

History is not another name for the past, as many people imply.  It is the name for stories about the past. A. J. P. Taylor

I increasingly believe that to understand why things are the way they are and why they are not something else we have to know about the past and try to understand it.

I am currently helping to advise on a research programme called CommonHealth which is co-ordinated by the Yunus Centre for Social Business and Health at Glasgow Caledonian University.  One of the really interesting elements of the research is a look back at what happened with the community business movement mainly in Scotland in the 1980s and 90s.  It is extraordinary how we interpret the past in different ways adding and detracting bits and pieces to fit our view of the present.  The past is definitely open to interpretation but, if we manage to be as objective as possible, it can help us see the present and the immediate future with more clarity.

One interesting aside, and an issue that has arisen within the research project, is that the years ‘post-internet’ are much more widely accessible than the time before the internet which is sometimes overlooked as it involves reports and archives on dusty shelves…

Involvement in this research has recently led me to think about the historical roots of social impact assessment – where it has come from.  In this blog I want to consider the reporting on impact and in particular the historical development of the principles around social accounting and audit.

Long before the establishment of the Social Audit Network and back in 1993, Community Enterprise Lothian (who I worked for at that time) worked jointly with others to hold a conference in Edinburgh called ‘Counting Community Profit!: Defining and Measuring Community Benefits of Local Development and Business Enterprises’.  The conference attracted a number of important speakers – George McRobie (new economics foundation and Founder of the Intermediate Technology Development Group), James Robertson (author of ‘Future Wealth’ and ‘Future Work’), Rob Gray (then Professor at University of Dundee and author of ‘The Greening of Accountancy’) – to name just a few.

The conference was over-subscribed and pivotal in many ways as the Institute for Social and Ethical Accountability (ISEA) – now called Accountability – was formed shortly after and the new economics foundation went on to explore ‘social audit’ more and subsequently wrote the ‘Social Audit Workbook’ with John Pearce.  Those working in ‘social audit’ as it was known then, used much of what had been discussed in the conference to devise principles for ‘social audit’.

After further consideration following the conference ‘social audit’ adopted the following principles:

Multi-perspective: reflect the views of (all) those involved with or affected by the organisation.

Comprehensive: (ultimately) embrace all aspects of an organisation’s social etc. performance.

Regular: take place regularly (annually) and not on a one-off, occasional basis, and become embedded in the culture and operation of the organisation.

Comparative: offer a means whereby an organisation can compare its own performance over time; relate performance to appropriate external norms; and make comparisons with other organisations doing similar work.

Verification: audited by one or more persons with no vested interest in the organisation.

Disclosure:  findings made available to all stake-holders and published for the wider community.

The over-arching principle of continuously improving social performance.

It is interesting that the principles do not include measurability as it was recognised at the time that many social aims are not measurable in the sense that you use a standard yardstick and give it a numerical or standardised value.  Those pioneers in social accounting accepted that it would be a nonsense to try and measure everything – but where you can, do; and where you cannot, still try to assess the change in qualitative terms.

The above principles were espoused for quite a number of years.  In the mid-2000s connections were made with those keen on advocating Social Return on Investment and following a joint meeting in 2008 the fledgling SROI Network and the more established Social Audit Network (SAN) agreed to share a number of the same principles.  There was not complete agreement as SAN felt it was not possible to financialise all outcomes.  However, in the interests of collaboration a joint document (updated in 2010) was written and made publicly available.

Shortly after this meeting both organisations changed them slightly and adopted slightly differing principles to satisfy their differing audiences – the current Principles of Social Value have been published by Social Value UK (previously the SROI Network and the Social Impact Analysists Association). And for reference check out the eight SAN principles.

So what does mean for us now?

Certainly principles around social impact are important especially with the expanding interest in enterprises with a central community or social benefit.  Both approaches – Social Accounting and Audit; and Social Return on Investment – use their respective set of principles to assess the veracity of social reports using one or other of the approaches.  My problem with both sets is that ‘process’ has got in the way of ‘principles’.  That is some of the ‘principles’ are really about the process itself.

I would like to suggest that with the benefit of hindsight – which is where this blog started – we should have a rethink about the principles of social impact.  Concurrent with the evolution of these principles we should also look at the key aspects of all organisations to see if they are socially responsible.  Those key aspects being how an organisation treats its staff and volunteers; how is it governed; how it uses surplus; its financial sustainability; its impact on the environment; and how it affects the local economy.

By building on what has happened in this field of social impact in the past, we should be able to develop tools, approaches and key principles for the future.

The ‘stories about the past’ provide the bedrock for understanding the present, and the development of the future.  Is this what progress is?

Finally – and I hesitate – I would like to suggest a tweaked set of principles for social value…

Clarifying the true change and purpose that an organisation is working towards Focus
Tracking changes so that comparisons can be made over time and between organisations Improvement
Embedding the social impact process and making it central to what the organisation does Regular
Considering more than one view in assessing social value created by an organisation Multi-perspective
Demonstrating that data and information used is important and significant Materiality
Checking that the interpretation of the change that happens is as true as possible Verification
Involving stakeholders in assessing change that happens Engagement
Being open and disclosing what an organisation has achieved or not Transparent

Bingo!

Alan Kay, Social Audit Network (SAN) www.socialauditnetwork.org.uk

The importance of social capital and its link to social accounting…

I have worked with a wide range of social and community enterprises over the years and I am becoming increasingly convinced that an understanding of social capital can help significantly in accounting for how a social enterprise has an impact on its stakeholders and wider community.

I must admit that I was sceptical about the notion of social capital when I first came across it back in the late 1990s.  But the more I found out about it, the more it appeared to make sense and nowadays I see social capital in all relationships between people, between organisations and between people and organisations.

The main refuge for social capital seems to be in the world of academia which abounds with articles and learned papers about what it is and how it works.  This theoretical analysis has not really been adequately translated into practice.  Arguably it should be, as I believe social capital can be useful in understanding community development, business relations, health and well-being and urban and rural regeneration.

In trying to get to grips with the concept of social capital, it may be useful to consider it within an historical context – albeit an overly simplified one…

Back in the 1960s there was a belief that communities could be developed through improving housing and the physical environment. In the 1970s emphasis was laid on instigating social change through the provision of what were called ‘basic needs’.  The focus in the 1980s was much more on helping people with developing their skills that would enable them to get a job – or a better paid job.  In the 1990s there were an increasing number of community initiatives that tried to mobilise groups encouraging community capacity building.  Linked to this was a recognition that organisational development can contribute significantly to community change.  More recently there was been more emphasis on social and community cohesion and this is where social capital plays a major role.

So what is this thing called social capital?

Back in the 2000s I wrote a chapter in John Pearce’s Social Enterprise in Anytown and described social capital as being ‘that intangible “something” that exists between individuals and organisations within a community; the connections and trusting contacts that people make while going about their daily business’.

Following the work of the CONSCISE Project and work since, six elements to social capital have been identified and these fall into three categories:

  • Trust, social networks and reciprocity/mutuality are about the relationships between individuals and organisations;
  • Shared norms of behaviour (values) and shared commitment and belonging are about more than one individual and/or organisation sharing values and sharing a way of thinking
  • Effective information channels permit individuals and organisations to access information from outside and within the community

This can be summarised diagrammatically…

soc capital diagram

So how does all this work in the context of a community enterprise keeping social accounts and compiling a social report?  (In this blog I shall use the term ‘community enterprise’ but much of what is said can equally apply to ‘social enterprise’ and voluntary organisations, and so on.)

One way is to carry out what we called a ‘stocktake’.  This assesses whether or not a community enterprise is committing itself to a social capital approach.  The Social Capital Stocktake is a tool that any social enterprise can use in a heuristic way to ascertain the extent and depth of social capital and its generation within a community enterprise.

Here is an example of some of the questions around trust that could be included in the stocktake.  The questions might be completed individually, then discussed in a group of those involved in the community enterprise with the aim of bringing about a ‘healthier’ score. (‘5’ means that one totally agrees with left hand statement; and ‘1’ means that one totally agrees with the right hand statement).

In general we trust the organisations we work with 5  4  3  2  1 We are not very trusting of other organisations
We think that the organisations we work with are very much trusting in us and feel we are reliable 5  4  3  2  1 We no not think that other organisations trust us to deliver and be relied upon
We trust our staff and Board members to do things well on our behalf 5  4  3  2  1 Relationships between people doing work for us and on behalf of us is not based on trust

Very often community enterprises (and indeed others within the wider social economy) do not acknowledge social capital and dismiss it as ‘common sense’ or ‘networking’ or ‘what we do anyway’.   I would argue that it is only when you take stock of social capital, that you begin to recognise it and understand its value to your community enterprise.

The above self-assessing stocktake could be part of a social report and could be used to recognise trends – while at the same time flagging up the importance of taking social capital into account in future planning.

The other side of this, is assessing levels of social capital within communities and then trying to work out whether not a community enterprise contributes to those levels.  This is much harder.  People have developed a series of questions asking residents in a community how they would respond to a certain situation and then from these responses make a judgment of the levels of social capital within a community.  Or alternatively others ask a series of questions to be answered by the wider community. Here is an example of some possible questions (the numbering applies as above).

People in this community are ready and willing to help others 5  4  3  2  1 People in this community are only concerned with their own lives
It is easy to get involved in community activity here. 5  4  3  2  1 It is difficult to get involved in community activity here.
People mix well across all social groups in this community 5  4  3  2  1 People don’t mix well across social groups in this community

Back in the early days of social accounting and audit and especially when the practice centred around community enterprise, there was an expectation for a community enterprise to assess and describe the socio-economic profile of the area served by the community enterprise.  In recent years, the guidance in keeping social accounts is to only include the community context and details on the community needs the enterprise will focus on.

There is also a question of attribution.  How does one know that the raised level of social capital in a community, say, can be because of the actions of the community enterprise?  This is difficult and it is best to assume that if the actions and objectives of the community enterprise are clear, and the levels of social capital reportedly rise, then it can be said that the actions of the community enterprise have at least contributed to the increase in levels of social capital.

All types of enterprises do not exist in isolation but as part of a web of interconnected relationships.   In getting things done and in making things happen they should be able to tap into contacts and use good relationships to carry out effectively what they want to do.

There are, however, limitations to what high levels of social capital can do.  It has to be used in conjunction with other forms of capital – financial, human, environmental and cultural.

Despite this, making an assessment of social capital generated and used by a community enterprise as part of a social report, I believe, is important.  An analysis of the form and nature of relationships a community enterprise has with other organisations is crucial and can show where it should focus in developing and enhancing those relationships.

This link between social capital and the actions of a community enterprise can be reported within a social impact report – benefiting the enterprise in terms of future planning and resource allocation; and its wider community in terms of more cohesion and enhanced inter-relationships.

Alan Kay – Social Audit Network (SAN) www.socialauditnetwork.org.uk

Should we put a financial figure on all the impacts made by a social enterprise?

In Jonathan Coe’s book ‘Number 11 or Tales that Witness Madness’ one of the characters joins the ‘Institute for Quality Valuation’ that is intent on putting a financial value on practically anything and everything.  The character is describing society in general when they say…

“We are dealing with people who have no notion at all that something is important unless you can put a price on it.  So rather than have them dismiss…well, human emotion, altogether, as something completely worthless, I think it’s better if someone like me comes along and tries to help them out.  Makes some sort of case for the defence.  Se we’ve coined a new term – ‘hedonic value’ that might refer to, say, the feeling you get when you look at a beautiful stretch of coastline. And we try to prove that this feeling is actually worth a few thousand pounds…”

This is, of course, fiction and other characters in the book are skeptical at the idea of putting financial value on all things.  But it is surprising how in a relatively short period of time the seemingly accepted way of assessing social impact for organisations with a central social purpose is to convert all their social outcomes into a financial figure.

This idea was first introduced into the UK by the new economic foundation who built on and developed pioneering work carried out by the Roberts Enterprise Development Fund in California.  It was referred to as Social Return on Investment or SROI.    This has led in the further development of the ‘social impact industry’ although there is a whole array of other measures which are forming part of that industry – such as ‘value for money’ figures, extending the role of Cost Benefit Analysis, and so on.

But should we really, as a society, be trying to put a financial value on all things? Certainly, to do this has a function.  If you were a policy-maker and trying to decide how to spend restricted financial resources on, say, building more care homes for elderly people or putting the resources into taking care services to people in their own homes, you could then assess the costs, use an ‘impact map’ to identify outcomes, provide them with a financial value and finally work out the most cost effective path.

As a tool to decide on investment, it might work well.  Investors like the idea of providing a more tangible value on things that, although valued, have not traditionally had a financial value put on them.  Very often investors and funders want to know the ‘bang they get for their buck’ – what amount of ‘social value’ comes from their initial investment expressed in pounds and pence.

But my argument is that if this is what is required by investors then investors should be the ones that calculate the social return on their investment.  It does not follow that all social enterprises should be encouraged to measure their success by using an approach that monetises all the outcomes from the social enterprises’ activities.

To go back to Coe’s entertaining book, the same character as before was trying to put a price on the myth (is it a myth?) of the Loch Ness Monster.  Belief in the Monster does contribute to the tourist industry and you can translate the myth into some sort of financial figure.  I would argue that that should be done by people wanting to sustain the myth and support the tourist industry.  We do not put the onus on the Loch ness Monster to carry out an SROI!  They, no doubt, are busy being monstrous…

We at the Social Audit Network (SAN) believe that although looking at the social return arising from an input of resources has a place, it is much more helpful for an organisation with a social purpose to keep an account of their performance and to try as much as possible to demonstrate their impact on people, the environment and the society more generally.  Since the mid-2000s SAN has engaged with SROI colleagues, discussing and considering our different approaches, undertaken research which helped to shape underpinning principles to this whole area of social impact.  However, whilst SROI has its place, for us there are a number of central reasons that make our approaches distinct. I would like to outline them here.

Firstly, context matters.  Where a social or community enterprise is working and with whom, can matter tremendously.  Therefore, within social accounting the contextual information is encouraged – as it provides background and explains more fully the social need being addressed.

Secondly, by requiring to put a financial figure on all outcomes, there is a tendency to see the solution to addressing the social need as financial.  Often people working in the development of communities or in addressing a deficient social need will tell you that putting money into addressing these needs solves only part of the problem. A social need requires social solutions.

Thirdly, social accounting and audit tries to get organisations to address their overall performance against their objectives and does not only ask for the impact an organisation has.  For us, it matters what type of structure and values an organisation espouses – and this should be reported on.

Fourthly, there is a danger in having to put a financial figure on all the outcomes in order to come up with a financial ‘return’.  We believe that not everything can be valued in financial terms and the extensive use of financial proxies (which is often the case using SROI methodology) can lead to spurious claims and begins to move further away for a ‘real’ or tangible ‘return’.

Fifthly, although developing an ‘impact map’ of inputs, outputs and outcomes can be really helpful for a social enterprise to plan its strategy, carrying out an exercise in looking at the social return does not necessarily help the organisation to perform better.  The SROI process is often very specific and focussed – whereas social accounting is more holistic and a broader approach – thus of more directly related to improvement.

Sixthly, the value for an organisation to regularly report on its performance and impact can be hugely beneficial when the organisation does it themselves.  Many exercises in calculating the social return on investment are done by consultants and people outside the organisation.  The real value of not only proving the impact you might be having, is also in improving through learning more about your own organisation and retaining that knowledge.

So where does this leave us?  Certainly, reporting on one’s own organisation in terms of how well the organisation has performed and what kind of impact and degree of social impact one has had, is important.  In the future it will inevitably become a requirement –  particularly for those organisations in receipt of funding or investment.

The argument that SAN has, is that financialising everything is not a desirable avenue to be going down.  A social enterprise should be assessing whether or not it is performing well and what sort of beneficial social change is happening as a result of its activities. But having to stick a financial value on all of that changes seems to us to be crazy.

There are other characters in Coe’s novel who listen to the reasons for monetizing social value and poke fun.  I do not advocate this, but feel that putting a financial value on all the intangibles that make up a life is a diversion.  Instead we should be supporting organisations that improve people’s lives and livelihoods and to report regularly on their performance and impact – more generally…

Alan Kay Social Audit Network (SAN) www.socialauditnetwork.org.uk

February 2016

 Disclaimer: the views included in the above blog are not necessarily the universal views of the all the members of the Social Audit Network

Assessing social enterprise and their impacts? Are we looking at the right stuff?

With the rapid expansion of what is now really an ‘industry’ surrounding the measurement and assessment of social impact, it may be beneficial to reflect on whether or not we are looking to assess the ‘right’ things.  Are social enterprises, in particular, focussing their energy on the things that matter?

In this blog I would like to look at two things.

The first is the seemingly dogged emphasis on ‘impact’ and not always paying sufficient attention to the performance of an organisation.  Linked to this is a lack of attention to an organisation’s approach, its values and its way of doing things that make it different from other organisations – particularly privately owned businesses.

The second is much wider and I shall argue that the accepted and traditional triple bottom line impacts of social, environmental and economic should be questioned.  Arguably, social enterprises should be aiming to impact on people, the environment and society or ‘culture’.

So taking the first…and to do this I want to look at the history of social accounting and audit.  Back in the 1990s social and community enterprises, along with voluntary organisations tried reporting regularly and in a systematic way on their overall performance against their objectives.  In the mid-2000s, there was a pendulum swing away from performance and much more stress given to the impact an organisation has on its stakeholders.  This was largely linked to the meteoric rise in Social Return on Investment (SROI) and, I believe, driven by investors and funders wanting to get a bigger bang for their buck.  Reporting by social enterprises and similar third sector organisations focussed almost entirely on the outcomes for stakeholders and not nearly so much on how well the organisation performed given the context in which it was working, or on what type of organisation it was trying to be – its approach, its shared values and so on.

There are recent signs that this pendulum swing is beginning to move back and people are now also wanting to know if the organisation is performing well – not least of all the organisation itself.  There is also a need to know if it is a ‘good’ organisation to be seen to be investing in, to be working for and to be proud to support.

With Social Accounting and Audit (SAA) an organisation is expected to report not only on its outcomes and impacts on stakeholders, but also on its performance against its overall purpose and objectives.  Again, context is important as often organisations are operating under difficult circumstances and providing goods and services in often the most challenging of situations.

In addition, and using the SAA framework, organisations are obliged to report on their internal processes and values.  This is mainly through the use of a simple checklist called the Key Aspects Checklist which prompts the organisation to consider its own approach to 6 aspects common to all organisations:

  • how the people who work for an organisation are treated;
  • how the organisation is governed and how accountable is it;
  • how surplus is used and whether or not there is an asset lock;
  • its financial sustainability;
  • how it impacts on the environment; and finally
  • how it contributes to the local economy if it is community based.

Turning to the second thing I want to look at…the impacts.  Traditionally, it has been widely regarded that social enterprises have a ‘triple bottom line’ of social, environmental and economic impacts.  I am increasingly of the opinion that social enterprise should be using economic activities as a means to an end – the end being working towards social, environmental and societal impacts (see diagram).

environmental impact

Rather than perceiving the economy as an ‘impact’, the use of economic activities is what a social enterprise does – a means. But this is different from the final ends, which are impacts on individual and groups (social), impacts on the planet (environment) and impacts on the relationship between people and groups (society).  Thus, economic activities are a means to an end and not an end in themselves.

A social enterprise has to ensure that it impacts on people and their livelihoods in a positive way ensuring prosperity and well-being.  I am defining prosperity here, as being more than money and distinct from wealth for its own sake.

All organisations and people have an impact on the environment.  At the very least, a social enterprise can monitor that it does not have an adverse or negative affect on the environment.

 In this model society is defined as the relationships between people and groups.  It includes the culture of a society – the way we do things, the rules and behaviours and the expectations of how things should be.  All social enterprises operate in a societal context and social enterprises in particular should monitor and at least account for their impact on the wider society in which they it operate – their contribution to a culture that promotes fairness, equality and the ‘common good’.

Social Accounting and Audit is not rocket science.  It is a holistic framework that enables an organisation to report on all aspects of its performance and impact, internally and externally.  It is only in having this well rounded view that an organisation can be in a position to improve and at the same time be able to prove thus evidencing its achievements and its contribution to social change.

Alan Kay, Social Audit Network (SAN), www.socialauditnetwork.org.uk

December 2015

The need for social ‘audit’…

Is it me or is there a huge increase of almost epidemic proportions of social impact reporting amongst organisations and social enterprises that wish to explain the social difference they make.

This is to be welcomed, but it does raise the question of how much credibility we should attribute to these reports.  Some of them are well-researched and detailed, others are more grandiose in their claims – but surely there must be some way of ensuring they possess integrity and are a true representation of what the organisation has achieved and the social impact it has made.

Understanding what changes as a result of an organisation’s actions is important, but it is also important to know that the claims made, have integrity.  Thus, in the same way that financial accounts are given credence with an independent audit of the financial detail, it is clear that an account of the social change achieved by or organisation should be independently audited.  This would enable on organisation to be confident of its claims and would show it to be accountable to a wide range of its stakeholders as well as to the wider public.

Organisations often employ independent evaluators to assess the degree of change that has happened as a result of their activity.  This is fair enough, but it is expensive.  Should an organisation not, therefore, keep social accounts using a social book-keeping system comprising of output and outcome information – and then subject that account to a ‘social’ audit?  This would lie alongside the financial accounts and provide a more holistic picture of an organisation’s performance and impact.

The Social Audit Network (SAN) has be wrestling with these issues since the early 1990s.  Through the experience of working with grassroots organisations and believing that organisations themselves can be empowered by keeping a track of their own monitoring and evaluation, we developed a process of ‘social accounting and audit’.

Annually an organisation would produce a social account of its performance and impact.  This would then go to audit.  In the early development of the process, a single ‘social auditor’ was used and this worked up to a point.  However, a single person does not know everything and we plumped for the idea of having a panel of people – one who is a ‘social auditor’ and chairs the Panel meeting; at least one who knows the field of the organisation’s operation; and at least one other that knows the geographical area in which the organisation operates.  To keep the costs down only the chair gets paid and the others volunteer.

The independent panel meets with the organisation for one day, having received the Draft Social Accounts in advance, and goes through them in detail suggesting changes, revisions, etc.  There is a process which allows for feedback and discussion and also includes a random trail back to source materials and a checklist matching the draft against the eight social accounting principles (include here).

The Panel is not evaluating the organisation but, instead is assessing whether or not the Draft Social Accounts are credible.  Once revisions have been made the Panel issues a statement – similar to a financial audit statement – that says, in their opinion, the social accounts are a fair reflection of what the organisation has achieved in terms of its performance and impact over the last social accounting period.  The accounting process and audit is then built into the life cycle of the organisation.

In assessing the operations and activities of complex organisations over, say, a year, can be complex and result in long and complicated reports that have to be audited.  For this reason often an organisation will write a summary version that is more widely distributed.  However, this summary could not be written as an accurate document if the evidence had not been included in a more substantial report.

The social accounting and audit process is not completely fool-proof, but actual experience shows that it is effective and can provide valuable and impartial feedback to an organisation that not only wants to prove what it does but also want to improve in its effectiveness.

SAN believes that the audit part of social accounting and audit is essential. If not, we are going to get swamped with detailed reports, purporting to explain the social, environmental and cultural change that has happened as a result of and organisation’s activities…without necessarily knowing if we, as the wider public, can take them seriously or not.

The social audit should not become a way of consultants and other companies making money.  It is about subjecting what one says about the performance and impact of an organisation, is true, meaningful and based on acquired and collected information – both quantitative and qualitative.  It would re-assure the wider public of the authenticity of ‘social impact reports’ and at the same time can be used to plan focus and future actions.

These are key reasons why social audit is badly needed – particularly for organisations with a central purpose around social change.

Lastly it has to be said that carrying through with social accounting and audit is not for the faint hearted…  An interesting early quote about ‘ethical accounting’ (which has much in common with social accounting) is…

“Ethical accounting is not for softies or funks. It takes guts to hang your dirty linen in public and to walk your talk.” Jorgen Giversen, former CEO of SBN Bank

Alan Kay – Social Audit Network (SAN) – www.socialauditnetwork.org.uk