What is social accounting?

Social accounting is a type of accounting that a company performs to assess the influence that its operations have on society. It requires companies to look closely at everything they do and what kind of impact their activities have on people, places and the environment. Social accounting does not deal with the kind of assets that financial accounting does; instead, it focuses on business behaviors and the kind of impact that behavior has. Any company can undergo this type of assessment, regardless of its size.

This process was an accounting phenomenon of the latter part of the 20th century. Its growth as an accounting discipline stems from the pressures that the environmental movement exerted on large corporations. Furthermore, it stems from the demand from governments and the public for companies to be more transparent about their activities and the implications of those activities.

The social accounting act attempts to establish a figure on the costs and benefits of a company's operations in relation to society and the environment. A company can measure the impact of its smokestack emissions on a neighboring region. A company can measure the impact of its community involvement and charitable contributions on the city or town in which it operates. You can measure the effectiveness of your hiring program and whether the program influences the unemployment rate in a region.

Social accounting, unlike financial accounting, seeks to understand the contributions, or lack thereof, that companies make to society. It refers to business behavior that contributes to the well-being of people and the planet. Consequently, social accounting is often referred to as social and environmental accounting, corporate social reporting, or corporate social responsibility reporting.

Due to its focus away from the financial reporting aspects of a company, social accounting is also known as non-financial reporting and sustainability accounting. The term sustainability applies to all operations of a business. A company can analyze whether it is sustainable as an entity from a social, environmental, cultural and financial point of view. A company can also analyze its ability to embark and remain committed to conducting business in a way that benefits society.

Social accounting is a process that can be performed by any type of entity, not just companies that focus on growth and profitability. This includes government agencies, non-profit companies and charitable organizations. At its core, social accounting is about accountability: it requires organizations to establish practices that contribute to the sustainability of the planet and the general well-being of humanity.