Corporate responsibility auditing

Corporate Responsibility Auditing Assuring What Companies Say to the Public is Truthful... 

Corporate responsibility auditing, a recognized management discipline first applied at APT Associates in the 1970s and later refined by The Body Shop and other companies in the mid-1990s to evaluate their environmental and social impacts, can help corporations assess how well they do what they say they do, and proactively convert rhetoric into reality. 

The premise of corporate responsibility auditing is the recognition by executives that the information provided to shareholders, as well as other stakeholders, on a corporation s performance needs to be truthful and reliable. Inherent in the auditing process is the provision of crucial knowledge that will sustain the public s trust and sharpen managements s collective focus on key nonfinancial value drives (e.g.,... 

At a minimum, corporate responsibility auditing can provide a complete picture of how well a company performs against its values, industry or global standards, peers, and the expectations of essential stakeholders. Many companies use the results to put in place, both internally and in partnership with major suppliers, credible and measurable process improvements that responsibly drive efficiencies, reduce risk, seize new business opportunities, and strengthen relationships with stakeholders. For many companies, corporate responsibility auditing also provides a verifiable and credible process for reporting to stakeholders on their social and environmental impacts and the effects on profitability. 

Corporate responsibility auditing can also identify how capital has been allocated across departments and business units of the company and the level and types of risks to which the capital is exposed. An experienced audit team will advise on whether risks in one part of the company may exacerbate or ameliorate those in another and, in consultation with employees and managers, recommend process improvements, which the audit will undoubtedly yield, where risks are too high. This information can provide management with a clearer understanding of acceptable tolerance levels for key value drivers, and reliable data with which to respond proactively to shifts in the work environment, key markets, and in society. 

TABLE 6.13. Steps in Conducting a Corporate Responsibility Audit... 

The Auditing Process. A corporate responsibility audit needs to be systemic in approach and cross-functional in scope. In addition to assessing the... 

A corporate responsibility audit can provide a system for managing change. Thus the audit team should start by assessing the corporate culture and leadership to determine early whether or not the organization has the capacity to change and how best to address obstacles (e.g., people and systems) before assessing the efficacy of the operating practices. 

Conclusion. For many leading companies, operating responsibly is implicit in their core business strategy, and corporate responsibility auditing is routinely used in maximizing values drivers and in reporting honestly to stakeholders on the company s entire performance. 

SmithOBrien, Corporate Responsibility Audit , 1995. Available at www.smithobrien.com. 

S. Waddock and N. Smith, Corporate Responsibility Audits Doing Well by Doing Good, Sloan Management Review, 41(2), 75-83 (2000). 

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