LO $9\mathrm{.}1$ Auditing CSR

The first step in the measurement of CSR or sustainability performance involves some type of auditing. Social auditing is a systematic assessment that identifies, measures, evaluates, reports, and monitors the effects an enterprise has on society that are not covered in the traditional financial reports. The purpose of social auditing is to provide information to management and to various stakeholders about the impact of the enterprise on society, and to provide a basis of accountability for the social consequences of corporate activities. Such audits can be used to assess existing performance, to evaluate the performance of managers in relation to social objectives, to provide an information base for planning, and to serve as a measure for assessing future performance.

There are many social auditing approaches. The main ones are:

Inventory$-$a listing of social activities without any evaluation.

Program management$-$a statement describing particular programs or initiatives, including an indication of the resources committed.

Process$-$a more elaborate approach incorporating the inventory and program management approaches. It includes an assessment of how each social program came into being, a statement of each program's objectives and the rationales behind each activity, and a description of what has been accomplished.

Cost or outlay$-$a social$-$economic operating statement that tabulates the expenditures an enterprise makes on social objectives less the negative costs for social objectives not addressed. The approach is to measure the total social impact, positive and negative.