Notes

Social Accounting: Concept, Definition, Features and Benefits

Social responsibility is an ethical framework and suggests that an entity, be it an organization or individual, has an obligation to act for the benefit of society at large. ... Social responsibility means sustaining the equilibrium between the two.

Social accounting is first and foremost accounting. Similar to traditional accounting, it is a method of quantifying a company's performance. ... “Social Accounting is the process of measuring, monitoring, and reporting to stakeholders the social and environmental effects of an organization's actions.

DEFINITIONS
1.In the words of Richard Dobbins and David Fanning,
social accounting is “the measurement and reporting of information concerning the impact of an entity and its activities on society.”

2.The National Association of Accountants (NAA) Committee defined social accounting as
‘the identification, measurement, monitoring and reporting of the social and economic effects of an institution on society.”

3.“Social Accounting is the application of double entry book keeping to social economic analysis.” —Kohler

It is, thus clear that social accounting is concerned with the internal and external reporting of social costs and benefits both in quantitative as well as qualitative terms by a business enterprise.

Objectives of social accounting

Main objectives of social accounting are to help society by providing different facilities by enterprise and to record them. We can write them in following points


1. Effective utilization of natural resources
Main objectives of making social accounting is to determine whether company is properly utilize their natural resources or not .

2. Help to employees
Company can help employees by providing the facility of education to children of employees, providing transport free of cost and also providing good working environment conditions .

3. Help to society
Because companies' factories spread the pollution in natural society which is very harmful for society . So , enterprise can help to society by planting the trees , establishing new parks near factory area. and also opening new hospitals


4. Help to customers
In social accounting this the part of benefits given by company to society , if company provides goods to customers at lower rate and with high quality .

5. Help to investors
Company can help to investors by providing transparent accounting information to investors .

Because of many objectives are related to safeguarding of natural resources so this accounting is also known as Social and Environmental Accounting, Corporate Social Reporting, Corporate Social Responsibility Reporting, Non-Financial Reporting, Sustainability Accounting

Advantages Corporate Social Responsibility
Now that we know what CSR means and what its forms are, we will read about CSR’s advantages.

Improvement in the image of the Corporation
The most obvious advantage that a corporation can obtain by implementing CSR policies is that of an increased goodwill value. This serves a dual purpose – Firstly, people will want to buy the product that the corporation is selling because of its good and clean image. Secondly, other enterprises will want to do business and be associated with the corporation. This increases the corporation’s prestige to such a high level that its name may become synonymous with reliability and goodness.

People always want to be associated with the best and the most popular, so in that respect, the corporation rises in stature and becomes an important player in its market.

Increased Attraction and Retention of Employees
Companies having solid CSR commitments find it easier to recruit and retain employees. People want to work for companies that care about the well-being of their employees and provide good working conditions. Compassionate attitude towards employees is highly desired by both new recruits and old employees alike. Appraisals, financial assistance in times of need, and attention given to personal achievements and special days (like birthdays) make employees want to remain with the company.

This is a huge advantage when there is a tight labor market situation. This will reduce the cost of training new recruits and free up incentives for existing employees. Incentives induce efficient work out from employees. In short, if the company’s workforce is happy, the company gets more profits due to increased efficiency in production.

Regulatory Authorities become less hostile
A corporation with strong CSR programs will not be scrutinized by regulatory authorities as much as companies without CSR programs. The authorities will be lenient in their regulation because they feel that the company must be complying with all regulations as it is supported by firms and people alike for its welfare work. A company with strong CSR programs will always work within regulations to get benefits (other than profits) from these CSR programs.

The authorities will give fast-track preference to this company. It may also forego cumbersome paperwork that is required to set up projects if it thinks that this project is going to help the community to improve.

Attracts more Capital Inflow from Various Sources
A company’s image plays a huge role in attracting investors. If the company is engaged in CSR programs, its image gets a massive boost, and so, people invest in its operations heavily. This company will attract capital even from abroad in the form of FII, thus, helping the country to get valuable foreign exchange. It will also attract investment from other firms and industries, and it will become a name that can be trusted easily.

Even the Government of the country may be willing to invest in the company, leading to lesser regulation and red-tapism.

Generation of Clean and Renewable Energy from Environmental CSR
If the company has invested in an environmental CSR program, it will make sure that its operations do not harm the environment in any way. Inventing machines and techniques to reduce the harmful effects of its operational activities will give the community a clean environment. It will also give the company a chance to explore the usage of renewable energy for its operations.

This will reduce the cost of acquiring fossil fuels and can reduce the cost of production by a one-time investment in renewable energy production.

Positive Publicity
A popular business principle is that any publicity is good publicity. You should be known to the people to sell your product. A good CSR program will always give good publicity and even act as an advertisement for the company.

It also sets the company apart from its competitors. They may be selling a similar product at lower rates, but you are keeping the interests of your environment and community intact, and so the people do not mind a little extra charge for this thoughtfulness.

Disadvantages Corporate Social Responsibility
Now we will see why CSR is criticized in business circles.

Shift from the Profit-Making Objective
Milton Friedman, an economist, is the biggest critic of CSR. He says that CSR shifts the focus of the company from the objective that made it a financial entity in the first place – profit-making. The company forgets about its obligations towards its shareholders that they have to make profits for them. Instead of focusing on making profits, they engage in CSR programs and use up funds for community welfare.

So basically, instead of an income, the company is effecting an outflow of cash and not fulfilling its profit-making obligations.

Company Reputation takes a hit
According to CSR policies, companies have to disclose shortcomings of even their own products if they are found to violate the CSR program. For example, car manufacturing companies calling back their vehicles in large numbers when they find glitches in the model after having sold them wallops their reputation.

This creates inconvenience to the customers, and they lose trust in the manufacturer.

Customer Conviction
Initially, customers like to see the companies that they trust are engaged in social welfare programs. They like the fact that these programs are for a good cause. Later, they grow wary of it. If they don’t see instant results from these programs, they think that these are nothing but PR stunts. So it becomes difficult to convince customers that the results will take some time in coming and that they should continue believing in the good intentions of the company.

These attempts of convincing become fruitless day by day because some customers are impatient and have a constant desire to be appeased.

Increase in Cost of Production
More often than not, CSR programs increase the expenditure of the company. This increased expenditure is reflected in the increased prices of the product for which, ultimately, the customers have to pay.

Large corporations can absorb this increased expenditure. They may not increase their products’ prices, but small businesses have no other option but to increase their products’ prices to meet their increased expenses.