CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND
TO THE STUDY
In
the era of corporate social responsibility, where corporations are often
expected not just to deliver value to consumers and shareholders but also to
meet environmental and social standards deemed desirable by some vocal members
of the general public including the host communities, social auditing can help
companies create, improve and maintain a positive public relations image. In
essence, social auditing will enhance rural development by means of corporate
social responsibility by companies (Zadek, Pruzan & Evans, 1997).
Social
auditing also entails a formal review of a company's endeavors in social
responsibility. A social audit looks at factors such as a company's record of
charitable giving, volunteer activity, energy use, transparency, work
environment and worker pay and benefits to evaluate what kind of social and
environmental impact a company is having in the locations where it operates
(Zigga, 2003). Social audits are optional i.e. companies can choose whether to
perform them and whether to release the results publicly or only use them
internally. It also involves the process of evaluating a firm's various
operating procedures, code of conduct, and other factors to determine its
effect on a societal development. The goal is to identify what, if any, actions
of the firm have impacted the society in some way. A social audit may be initiated
by a firm that is seeking to improve its cohesiveness or improve its image
within the society by means of contributing to the development of the community.
If the results are positive, they may be released to the public (Wikipedia,
2015). For example, if a factory is believed to have a negative impact, the
company may have a social audit conducted to identify actions that actually
benefit the society.
Companies around the globe are beginning
to assess their social performance and report the results of those assessments
as a means of demonstrating their commitment to social responsibility. These
audits can help companies identify risks, noncompliance with laws and company
policies, and areas that need improvement. As a result, it can be used as a
tool for rural development. An audit should provide a systematic and objective
survey of the firm’s ethical culture and values. Audits can also spotlight
social responsibility activities and accomplishments related to environmental
impact, sustainable development, consumer welfare, fair trade, treatment of
employees, and relationships with other stakeholders. These reports are often
called “social audits,” “social responsibility reports,” or “corporate
citizenship audits (Zadek, Pruzan & Evans, 1997).”
Regardless of what name they go by, the
reports of such auditing efforts are important for demonstrating a firm’s
commitment to and ensuring the continuous improvement of its social
responsibility efforts. Without reliable measurements of the achievement of
social objectives, a company has no concrete way to verify their importance,
link them to organizational performance, justify expenditures to stockholders
and investors, or address any stakeholder concerns.
Social auditing are tools that companies
can employ to identify and measure their progress and challenges to
stakeholders—including employees, customers, investors, suppliers, community
members, activists, the media, and regulators—who are increasingly demanding
that companies be transparent and accountable for their commitments and
performance.
The auditing process is important to
business because it can improve financial performance, increase attractiveness
to investors, improve relationships with stakeholders, identify potential
liabilities, improve organizational effectiveness, and decrease the risk of
misconduct and adverse publicity. A firm’s reputation depends on transparency
and openness in reporting and improving its activities. The social audit
provides an objective approach for an organization to demonstrate its
commitment to improving strategic planning, including showing social
accountability and commitment to monitoring and evaluating social issues. Thus,
it is critical that top managers understand and embrace the strategic importance
of the social audit in order to contribute to the development of their host
communities. Key stakeholders of the company should also be involved in the
audit to ensure the integration of their perspectives into the firm’s economic,
legal, ethical, and philanthropic responsibilities (Waddock & Smith, 2000).
Companies are working to incorporate accountability into actions ranging from
long-term planning to everyday decision making, including corporate governance,
financial reporting, and diversity. The strategic responsibility goals and
outcomes measured in the social audit need to be communicated throughout the
organization and to all of its stakeholders so that everyone is aware of what
the company would like to achieve and what progress has been made in achieving
its goals. The social audit should provide regular, comprehensive, and
comparative verification of the views of stakeholders. Disclosure is a key part
of auditing to encourage constructive feedback. Directions for finding best
practices and continuous improvement on legal, social, ethical, philanthropic,
and other issues can come from all stakeholders (Waddock & Smith, 2000).
1.2 STATEMENT OF THE PROBLEM
Stakeholders are demanding increased
transparency and are taking a more active role in communicating their
expectations and asking for corporate accountability on a variety of issues.
Government regulators are calling on companies to increase the quantity and
quality of information disclosed aimed at increasing the companies’ accountability
to society. For example, the Sarbanes-Oxley Act requires top financial officers
to file their company’s code of ethics with the Securities and Exchange
Commission. A number of financial and auditing decisions must also be reported
on a regular basis.
In general, social auditing is not
usually associated with regulatory requirements, whereas financial audits are
required of public companies that issue securities. Because social audits are
more voluntary, there are fewer standards that a company can apply with regard
to reporting frequency, disclosure requirements, and remedial actions that it
should take in response to results. This may change as more companies build
ethics and social responsibility programs in the current environment. However,
this study is examining social auditing as a tool for enhancing rural
development in Nigeria.
1.3 OBJECTIVES OF THE STUDY
The
following are the significance of this study:
1. To
examine social
auditing as a tool for enhancing rural development in Nigeria.
2. To examine the level of practice of
social auditing by Exxon Mobil Eket.
3. To
identify the benefits of social auditing to rural area and host communities.
1.4 RESEARCH QUESTIONS
1. Can
social
auditing be used as a tool for enhancing rural development in Nigeria?
2. What is the level of practice of social
auditing by Exxon Mobil Eket?
3. What
are the benefits of social auditing to rural area and host communities?
1.5 HYPOTHESIS
HO:
There is no significant relationship between social auditing and rural
development in Nigeria
HA:
There is significant relationship between social auditing and rural development
in Nigeria
1.6 SIGNIFICANCE OF THE STUDY
The
following are the significance of this study:
1. The
outcome of this study will educate the managers of companies, stakeholders and
the general public include companies host communities on the rudiments of
social auditing and its effect on rural development.
2. This
research will be a contribution to the body of literature in the area of the
effect of personality trait on student’s academic performance, thereby
constituting the empirical literature for future research in the subject area.
1.7 SCOPE/LIMITATIONS OF THE STUDY
The
study will cover the practice of social auditing by Exxon Mobil Eket and its
effect on rural development.
Financial constraint- Insufficient fund tends to impede the
efficiency of the researcher in sourcing for the relevant materials, literature
or information and in the process of data collection (internet, questionnaire
and interview).
Time constraint- The researcher will
simultaneously engage in this study with other academic work. This consequently
will cut down on the time devoted for the research work.
REFERENCES
Zadek Simon,
Pruzan Peter, and Evans Richard (1997): “Why Count Social Performance?,” in
Building Corporate Accountability: Emerging Practices in Social and Ethical Accounting,
Auditing, and Reporting, Ed. London: Earthscan Publications, 12–34.
Zigga Paul
(2003): Business for Social Responsibility, “Accountability,” http:// www.bsr.org/BSRResources/WhitePaperDetail.cfm? DocumentID = 259, accessed September
9, 2003.
Sandra
Waddock and Neil Smith, (2000). “Corporate Responsibility Audits: Doing Well by
Doing Good,” Sloan
Management Review 41
(Winter 2000): 75–83.
Wikipedia
(2015): www.wikipedia.com/socialauditing