Frequently Asked Questions (FAQ)

The concept of the social responsibility of enterprises has progressed rapidly in the last few decades. An organization’s performance in relation to the society in which it operates and its impact on the environment has become a critical part of measuring its overall performance and its ability to continue operating effectively.

In India, the Gandhian philosophy of trusteeship captures the business responsibility towards society. The philosophy of giving back to the society has been an integral part of the culture, which has also been imbibed in traditional Indian businesses since time immemorial.

Responsible Business Conduct is a globally recognized concept founded on the idea that businesses can perform better when engaged in re-vitalizing the society from which they extract resources for production. The National Guidelines on Responsible Business Conduct, 2018 (NGRBC), encourage businesses to contribute towards broader development goals while seeking to be economically viable.

Development of sustainability reporting standards like Global Reporting Initiative (GRI) ISO 26000: Guidance on Social Responsibility, Principles of Responsible Investing (PRI), Sustainability Accounting Standards Board (SASB) have contributed significantly to our understanding of social responsibility.

India is a signatory of global initiatives like The Sustainable Development Goals (SDGs), adopted by the United Nations in 2015. These global initiatives address universal social development issues and call to action to end poverty, protect the planet, and ensure that by 2030 all people enjoy peace and prosperity.

With sharp focus on the social impact of business, standards, frameworks and guidance on social auditing have become essential requirements. Monitoring, measuring and reporting the social performance of enterprises have emerged as a regulatory requirement. Based on the guidance in NGRBC, Business Responsibility & Sustainability Reporting is a compliance requirement for the top 1000 companies in India. The fact that NGRBC is dovetailed with the United Nations Guiding Principles on Business & Human Rights (UNGP) makes the BRSR disclosures globally relevant.

In India, the concept of monitoring and evaluation of social development activity and performance audit of flagship social development programs has been active for national social development initiatives like National Rural Health Mission, Sarva Shiksha Abhiyana, Pradhan Mantri Gram Sadak Yojana etc.

Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) was launched in 2006. It is pegged as the most ambitious anti-poverty program, which guarantees 100 days of unskilled manual labour for adult members in rural households. The Gram Sabha is expected to monitor the NREGA and conduct social audits of all NREGA projects implemented in the Gram Panchayat.

With the introduction of the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2020 – social impact assessment came into the purview of compliance

In the said Rules, in rule 8, after sub-rule (2), following sub-rule is inserted, namely: –

“(3) A company having the obligation of spending average CSR amount of Rs. 5 Crore or more in the three immediately preceding financial years in pursuance of sub-section (5) of Section 135 of the Act, shall undertake impact assessment for their CSR projects or programmes, and shall disclose details of the same in its Annual Report on CSR.”

With the forthcoming launch of the social stock exchange – social impact assessment has matured with well-defined deliverables. For the first time, the development of Social Audit Standards (SAS) by ICAI has defined the required social audit procedures for 16 thematic areas of social development.

There are many definitions of social audits. Some of the more acceptable ones are listed below.

1. Social Impact Assessment is the process of reviewing and verifying the Social Accounts at the end of each social accounting period. The term ‘social audit’ is sometimes used generically for the concept and for the whole process.
2. A Social Impact Assessment is a formal review of a company’s endeavours, procedures, and code of conduct regarding social responsibility and the company’s impact on society. A social Impact Assessment assesses how well the company achieves its goals or social responsibility benchmarks.
3. The NREGA defines social Impact Assessment as reviewing official records and determining whether state-reported expenditures reflect the actual monies spent on the ground.
4. Social Impact Assessment is a process that enables an organization to assess and demonstrate its social, economic, and environmental benefits and limitations. It measures the extent to which an organization lives up to the shared values and objectives it has committed. Social Impact Assessment assesses the impact of an organization’s non-financial objectives through systematically and regularly monitoring its performance and the views of its stakeholders.
5. Social Impact Assessment is an independent evaluation of the performance of an organisation as it relates to the attainment of its social goals. It is an instrument of social accountability of an organisation. In other words, Social Impact Assessment may be defined as an in-depth scrutiny and analysis of the working of any public utility vis-à-vis its social relevance.
6. The Social Impact Assessment process is intended as a means for social engagement, transparency and information communication, leading to greater accountability of decision‐makers, representatives, managers and officials. The underlying ideas are directly linked to concepts of democracy and participation.

Social Audit Network UK defines Social Auditor as “A person who chairs the social audit panel and manages the audit process at the end of each cycle, including the examination of the data and the sample checking to the source (the audit trail), and issuing the Social Audit Statement.”

SEBI defines a social auditor as an individual registered with a self-regulatory organization (SRO) under the purview of the Institute of Chartered Accounts of India (ICAI). To be qualified as a social auditor, an individual must qualify for a certification program conducted by the National Institute of Securities Market (NISM) and hold a valid certificate.

There is no new regulator for the profession. Securities and Exchange Board of India (SEBI) is the authority to regulate and National Institute of Securities Markets (NISM) will conduct examination for social impact assessors. There are self regulatory organizations such as http://isai.ca.in/ & https://saoicmai.in/about-us.html that will enroll social impact assessor with them.

To strengthen the governance framework in these entities, & provide better confidence to such investors, SEBI has introduced the concept of Annual Impact Report by a Social Impact Assessors. The purpose of this Social Impact Assessment is to ascertain the impact made by the Social Enterprise through its activities, intervention, programs or projects implemented during the reporting period. The annual impact report shall be audited by a Social Impact Assessor. 

It is expected that large number of Social Enterprises, both not for profit and for profit, will take advantage of the newly created architecture for raising funds through the mechanism of Social Stock Exchange (SSE). Each such Social Enterprise would be required to submit an Annual Impact Report to the SSE duly assessed by a Social Impact Assessor. Hence, there would be huge opportunities to practice as Social Impact Assessor.

A. An Individual if he

a. holds the required qualification and experience;

b. have attended a course at the National Institute of Securities Markets (NISM) and received a certificate of completion after successfully passing the course examination; and

c. is registered with a Self-Regulatory Organisation (SRO)

B. A Firm/Institution that has partners/employees who meet with the criteria for being a Social Impact Assessor and has a track record of minimum three years for conducting social impact assessment.

A. Post-graduates from universities recognized by University Grants Commission with a minimum of 3 years of experience in the development sector, or

B. Graduates from universities recognized by the UGC with a minimum of 6 years of experience in the development sector, or

C. Cost and Management Accountant, Chartered Accountant, or Company Secretary holding valid Certificate of Practice.

Features of Financial Audit

• Involves Audit of financial statements and transactions.
• Covers non-financial matters limited only to those aspects that provide additional information to stakeholders of the business who are mainly interested in the entity’s financial status.
• Financial Audits are done keeping in mind the objective of issuing an opinion on the state of financial affairs.
• Deals mainly with the study of financial data.

Features of Social Impact Assessment

• Looks at the impact caused on the society by the organization.
• Takes an “outside in” approach of looking at organization, dealing more with how the non-financial stakeholders view the business rather than how the managers/owners of the organization plan it to be.
• Deals with the study of social impact parameters, most of which can be gathered from outside the organisation which is being audited.
• Involves the stakeholders of the enterprise and adopts a triple bottom line approach.