16 May 2017

Ethiopia: Social Auditing Imperative Going


As it was the end of the month, April 2017, a deadline for businesses to declare their monthly VAT performances, one of my friends who owns and runs a small business had to report his VAT performance to the Lideta Sub-City's Tax Authority Bureau on one of the weekdays.

He did not waste a single minute to give me an appointment to see one another again later and would rush to the Tax Authority Bureau. Yes, people nowadays seem very vigilant to comply with the tax directive and financial auditing procedures. It is, maybe, because of the persistent tax education or punitive government measures upon failure to pay tax on time. I am glad to observe business people taking deadlines for declaring VAT performance seriously, albeit, short of one thing. They only care about financial auditing. Many business owners including my friend have never thought of social auditing nor have been reminded, much less are required to report on it.

However, I do feel that corporate managers, government authorities and other pertinent bodies need to pay high attention and have much concern about the social auditing aspect of our business firms for the time seems to demand that.

We are now in a very historical moment when we should work out the economic and social imbalances, skyrocketing living costs, unethical and corrupt business practices, overpricing, substandard or counterfeit goods trading, environmental pollution and the like. In responding to this gloomy business environment - ensuring transparency, promoting social responsibility and protecting the environment - financial auditing alone does not help. I think corporate social auditing and making it a requirement for business firms in Ethiopia to declare their performance on it, periodically, is the way forward.

Social auditing is the process of assessing and reporting on a company's performance on fulfilling the economic, legal, ethical, and philanthropic social responsibilities expected of it by its stakeholders. And it is beyond the usual "Corporate Social Responsibility (CSR)". I do not think most of our business firms care to fulfil such responsibilities.

Here, I do not want to put all our companies in a similar box. I know some business people who are labouring to make a balance between their profitability and social obligations, regardless of reporting their performance on it. I am also well aware that many companies in Ethiopia attempt to fulfil some social responsibility activities as part of their effort to get a loan from financial institutions or to comply with the requirements of government authorities for various certifications. However, these cannot account, in any way, to justify that we have done enough and in a systematic manner.

As a nation, we need to be more serious and systematic. Our companies need social auditing for us to do stable trading socially, establish an ethical business environment, target perceivable profit margins, fight corrupt practices, ensure social and economic balances, etc.

Yes, business firms in Ethiopia have to incorporate a performance audit of the major components of social auditing such as environment, human rights, business behaviour, ethics and corporate governance, community involvement and compliance involving their companies along the lines of financial auditing which they do routinely.

Business organisations have the responsibility and obligation to make environmental considerations in all their activities of production, marketing, and supply of goods. As much as they care for their profit, they are also expected to make sure that they respect fundamental human rights. Avoiding a discriminatory employment process and working environment, ensuring freedom of workers' association and collective bargaining, being free of forced and child labour are important values that business firms need to uphold.

I would also love to remind business firms in Ethiopia that their Ethical and Corporate Governance Policy/Social Policy should clearly indicate and reflect on ethical values, governing bodies, and make sure that it is in line with acceptable principles regarding relations with stakeholders and internal employees. Moreover, a company's entire business operation has to have a positive impact on local communities. Of course, in developing such a policy, they must consider various domestic and international legal obligations and other frameworks to comply with.

A business firm when audited against these social values encompasses different elements and involves many stakeholders. Its social audit performance report may reflect multi-perspectives to indicate the free and independent views of all the stakeholders. It can provide a comparative analysis of its company's performance with other similar organisations against appropriate external norms or benchmarks. It has to report on all forms of its company's social performance on a regular basis by a qualified social auditor. Finally, it must disclose the report to stakeholders and the wider community in the interest of accountability and transparency.

Apart from discharging social responsibilities, a social audit has various benefits to business companies. Such practice builds a positive image and enhances reputation, facilitates ways of improvement on performance, increases accountability, helps reorient and refocus priorities and manage any tension within a company. Therefore, I call for the development of a stronger general practical system to ensure Social Audits in our business entities in the time to come to benefit all.


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