Social Audit and Social stock Exchange

Social responsibility is a a new term coined with a company’s operations and its impact on society.

Company’s act 2013, have detailed provisions for ensuring that a corporate is properly accounted for their social responsibility under section 135 of the Act and relevant rules and regulations made there under. It is usual that if a law imposes a responsibility, usually most of the companies try to comply in letter and not in spirit. Social audit is an assessment of how well the company is achieving its goals or benchmarks for social responsibility.

Social audit is a process of assessing and evaluating an organisation’s social and environmental performance. It involves examining the organisation’s activities, policies, and impacts on various stakeholders, including employees, customers, communities, and the environment.

The main purpose of social audit is to understand and report on social responsibility, ethical practices, sustainability efforts. With this a company can identify areas where the organisation needs improvement and the areas where it performs well.

Social audits may cover a wide range of topics, including labor practices, human rights, community engagement, environmental impact, product safety, diversity and inclusion, and ethical sourcing. The results of a social audit are often presented in a report that highlights the organisation’s strengths, weaknesses, and recommendations for improvement.

Social audit is a tool which can ensure that the organisation is following the corporate social responsibility in letter and spirit. This also can enhance transparency and accountability and identify opportunities to align their business practices with sustainable development goals. This is not just useful to the company which is doing it, this is also useful to every kind of stakeholders.

In the 1970’s social audit expanded beyond co operatives or societies and started using in other types of corporates. This has done to make the organisations like corporations, government , trusts, societies and other non profit organisations.

The rest of CSR ( corporate social responsibility) movement, corporate governance initiatives, increased stake holder expectations for transparency and accountability have further propelled the adoption of social audit practices. The importance of social audit has been increased and also recognised by various laws and also we can say that it is getting more attention in the changing landscapes of corporate social responsibility, sustainability and stake holder engagement.

A large country like India have several social projects running for the welfare of the people. There always have a social aspect to its achievements in the right way. Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) have created lot of public talk and the need for social audit gained momentum.This program have the involvement of thousands of people in the employment front and guarantee minimum number of days of work. When we look on to the act we can find that there are provisions were made for conducting social audits to ensure the effective implementation of the program and prevent corruption and mismanagement.

The government of India recognised the value of social audit an included it as an integral component of MGNREGA. The Ministry of Rural Development along with state governments developed proper guidelines and procedures for conducting social audits under the program.

In social audit, local communities, beneficiaries, and vicil society organisations participate in the process of verifying and assessing the implementation of the project, including expenditure, quality of assets created, and adherence to prescribed guidelines. The results of social audit are documented and shared with relevant authorities for corrective action, as need arises.

With time moves, social audit has been extended to other social welfare programs. This ensures the transparency, community empowerment and proper delivery of benefits. States also have implemented social audit for several state government sponsored schemes.

SOCIAL STOCK EXCHANGE

SEBI has made amendments to ICDR Regulations and LODR Regulations by a notification dated 25th July, 2022, providing platform for social enterprises to raise funds through social stock exchange (SSE). This is a new concept in India. This new step will enable entities to raise funds through social stock exchange, the entities should be ‘ for profit organisations’ means through which social enterprises can raise funds, and obligation of social enterprises. To ensure and strengthen governance on these entities and to provide better confidence to investors, SEBI has introduced the concept of annual impact audit by social auditor.

The social auditor will ascertain the impact made by the social enterprise through its activities, intervention, programs or projects implemented during the reporting period.

Professional Opportunity as Social Auditor

A social auditor should

1. Hold the required qualifications

2. 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

3. Registered with a self regulatory organisation.

And if it is firm or LLP or other approved institutions

That the partners/employees who meet with the criteria for being social auditor and has track record of minimum three years for conducting social impact assessment.

Eligibility Qualification & Experience for Social Auditor

♦ Post-graduates from universities recognized by University Grants Commission (UGC) with a minimum of 3 years of experience in the development sector, or

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

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

NISM Social Auditors Certification Examination

As mandated by SEBI, NISM Social Auditors Certification Examination aims to create a pool of social auditors who would assess the impact of social interventions of various social enterprises who raise funds through the Social Stock Exchange platform.

How to register for NISM-Series-XXIII: Social Auditors Certification Examination?

• Register yourself of NISM website

• Select the certificate exam - NISM series XXIII: Social auditors certifications examination

• Select tester centre and other details.

• The fee is Rs. 1500/- with GST

• The examination will have 85 multiple choice questions and three case based questions ( each case having 5 questions) totalling to 100 marks. Exam should be completed in 2 hours. There will be negative marking of 25% of the marks assigned to a question. The passing score is 60%

• The study material will be in soft copy.

• The certificate is valid for three years and can be renewed after giving examination.

Institute of Social Auditors (ICSI-ISA)

The ICSI has set up the Institute of Social Auditors (ICSI-ISA) to empanel the Social Auditors. Further, the Institute has issued the ICSI Social Audit Standards (ICSI SAS 1 – ICSI SAS 16) to provide guidance to conduct Social Audit of Social Enterprises engaged in any of the activities as enumerated under Regulation 292E(2)(a) of SEBI (ICDR) Regulations, 2018. The same can be accessed at:

https://www.icsi.edu/media/webmodules/ICSI Social Audit Standards .pdf

In this regard,

The ICSI has made submission to the SEBI to specify the ICSI-ISA as SRO to empanel the Social Auditors with the ICSI-ISA. Further, upon receiving the approval from SEBI for the same, ICSI-ISA would start the empanelment process. ICSI-ISA invites expression of interest for initial empanelment of Social Auditors, in prescribed format, from experienced Social Auditors for conducting Social Audit of the Social Enterprises as prescribed by SEBI. It may be noted that, regular empanelment will be as per the regulations of SEBI and the norms for the same will be notified. Interested applicants may submit the following google form for the purpose of Initial empanelment: https://forms.gle/H14URjmuBT5NJaHh7

ICSI also wants its esteemed members to encourage the Not for Profit Organisations (NPOs) within the meaning of Regulation 292A(e) of SEBI (ICDR) Regulations, 2018 to get themselves registered on the Social Stock Exchange as Social Enterprises in order to avail the benefits of raising funds and executing any of the purposes under Regulation 292E(2)(a) of SEBI (ICDR) Regulations, 2018 successfully for which they have been established.

Reference : https://taxguru.in/chartered-accountant/social-audit-india-professional-avenue.html