Social accounting

Social accounting (also known as social and environmental accounting, corporate social reporting, corporate social responsibility reporting, non-financial reporting or non-financial accounting) is the process of communicating the social and environmental effects of organizations' economic actions to particular interest groups within society and to society at large. Social Accounting is different from public interest accounting as well as from critical accounting. This 21st century definition contrasts with the 20th century meaning of social accounting in the sense of accounting for the national income, gross product and wealth of a nation or region.

Social accounting is commonly used in the context of business, or corporate social responsibility (CSR), although any organisation, including NGOs, charities, and government agencies may engage in social accounting. Social Accounting can also be used in conjunction with community-based monitoring (CBM).

Social accounting emphasises the notion of corporate accountability. D. Crowther defines social accounting in this sense as "an approach to reporting a firm's activities which stresses the need for the identification of socially relevant behaviour, the determination of those to whom the company is accountable for its social performance and the development of appropriate measures and reporting techniques". It is an important step in helping companies independently develop CSR programs which are shown to be much more effective than government mandated CSR.

Social accounting is a broad field that can be divided into narrower fields. Environmental accounting may account for an organisation's impact on the natural environment. Sustainability accounting is the quantitative analysis of social and economic sustainability. National accounting uses economics as a method of analysis. The International Standards Organization (ISO) provides a standard, ISO 26000, which is a resource for social accounting. It addresses the seven core areas to be assessed for social responsibility accounting.

Social accounting challenges conventional accounting, in particular financial accounting, for giving a narrow image of the interaction between society and organizations, and thus artificially constraining the subject of accounting.

Social accounting, a largely normative concept, seeks to broaden the scope of accounting in the sense that it should:

It points to the fact that companies influence their external environment ( some times positively and many times negatively) through their actions and should, therefore, account for these effects as part of their standard accounting practices. Social accounting is in this sense closely related to the economic concept of externality. Social accounting offers an alternative account of significant economic entities. It has the "potential to expose the tension between pursuing economic profit and the pursuit of social and environmental objectives".

The purpose of social accounting can be approached from two different angles, namely for management control purposes or accountability purposes.