Social Accounting Socio-Economic Accounting as a Term

¶ … Social Accounting

Socio-economic accounting as a term and as a subdiscipline of accounting is a relatively new phenomenon. It is sometimes confused with social accounting, which is an established field of accounting and economics. Social accounting was first introduced by J.R. Hicks of Oxford University in The Social Framework: An Introduction to Economics, published in 1942. The accounting research of the time interpreted it as the whole system of accounts and balance sheets of a nation or a region, the price and quantity components of these accounts, and the various considerations to be derived there from. Social accounting was basically associated with national income accounting. An examination of the early publications in the accounting literature proves that point. A general theme in the early literature is the failure of the accountant to be involved in social accounting. The presence of business in initiatives implicating social accounting is so pervasive today that - parallel to what Monbiot (2001) observed to be a corporatization of the state - one can describe more recent developments in social accounting as the corporatization of social accounting. The manifestations of the ISEA and the GRI are here worth exploring.

Economic and social impact analysis calls for identification of all stakeholder groups -- self-conscious or not -- and an analysis of the impacts of each option on each group. USAID, the World Bank, and other donors have developed analytical approaches, but there is no consensus on methodology. All begin with standard cost-benefit analysis, as has been done by companies and organizations for generations. One practitioner quipped that this process can become too mechanical. The analyst called upon to propose options identifies the one that the analyst thinks best and then posits other options that are either illegal, immoral, or financially ruinous, thus ensuring adoption of the favored recommendation. Social accounting academics have long found themselves in this difficult and relatively under-populated area - lying between sophisticated critiques of current practice, imagining new (and "ideal") accounting systems and actively engaging with (hopefully emancipatory) practice (Gray et al. 1997).

In addition to the problem of mechanistic approaches, socioeconomic impact analysis faces a much larger dilemma. In performing a corporate or organizational cost-benefit analysis, the analyst can assume that it is the costs and benefits to the organization that matter most and deal with a limited number of actors. Socioeconomic policy analysts, however, have to define a wide range of actors and groups, each of which experiences costs and benefits. Computable general equilibrium models of the economy and other simulations may help understand which option will benefit defined groups and yield a sound macroeconomic picture. The groups and actors defined in the social accounting matrices that underlie the model, however, are often based on Western concepts of group identity.

Often, the more sophisticated the model and model user, the less likely the results will get through effectively to policymakers. The policymaker's political instincts may tell him that retrenching the civil service will affect one ethnic group more than another. Paying higher prices to cash crop producers likewise will benefit mostly the ethnic group concentrated in that cash crop zone. Both the civil servants who are retrenched and their rural relatives will feel the impact of retrenchment as a blow to the family's or clan's chances for advancement, whereas a few dollars per year for the cash crop will only marginally mitigate the poverty of the rural relatives. Social accounting matrices generally miss such points because the input table defines urban and rural residents as different interest groups. Moreover, the models demand a level of quantitative sophistication; this attracts mathematically minded researchers who sometimes have a low interest in political economy. Such researchers may focus on a single researchable variable, finding it difficult to place that analytical relationship in the context of all of the political variables a policymaker is weighing. They may be unable to translate their findings into plain language or to present them in ways that connect with policymakers.

What might have more policy impact in Africa today than computable general equilibrium models is political-philosophical debate on the nature of the common good. Ethnic competition saps African countries' economic growth by an average of 2% per year (Easterly and Levine 1996). Politicians' calculations and stakeholder analysis both need to go beyond how any specific group will benefit or lose. There needs to be a vision of what balance of policies will maximize benefits to the largest number while protecting the fundamental rights of minorities and individuals. Debate on such a vision is beginning to emerge in the African press. Election campaigns bring out party platforms that raise relevant questions. However, most countries are far from a national consensus on, or even a practice of referring to, the concept of national self-interest (Carroll & Buchholtz, 2000).

The increased power of transnational business, including relative to many nation state governments today, and the tightened grip of financial pressure within the context of a markets orientated globalization, has in our view enhanced the control of business over social accounting even further (Bailey et al. 1994, Monbiot 2001). If pressure groups and counter-information systems type activists have shifted more of their focus to a more global level, in part a positioning that has enhanced challenges to business, business attempts to displace and transform these initiatives have also been strengthened at the global level. As we have seen, transnational corporations have invested much in social, especially environmental, accounting - whether as integral to annual reports, in 'stand alone' reporting, in websites or in other media - that has aimed at mollifying social criticism and legitimizing business activities (Gray and Bebbington 2001:250). Recognizing the potentiality of more global regulation of the various quasi-legislative or context-pressurized types, business has sought to stay ahead of the game and sought to soften the impact of such regulation and minimize any prescription (Gallhofer and Haslam 1997). Interesting case studies here are the involvements of business in recent times in initiatives to mobilize and give professional or quasi-official status to social accounting at a global level. Reflecting their power, business interests have been working in co-operation with a variety of different agencies, most notably the United Nations, groups concerned with ethical investment, academics and professional accountancy bodies, in respect of such initiatives.

Business interventions have typically reflected instrumentalist concerns to manage public relations and to secure further control, consistent with conservatism or the enhancement of problematic hegemonic forces. In these business strategies, the wider context has basically been viewed from a narrow, instrumentalist perspective on what is best for business and in effect from a position aligned to the reproduction and enhancement of wider structures. Even the more positive interventions have substantively overlooked problematic structures and forces of the context. Such interventions have typically been aligned with mildly progressive forces while largely displacing attention from obstacles to substantive change. The more influential impact of business interventions in respect of social accounting has reduced to efforts that, rather than progressively emancipate, seek to deceive, distort, manipulate and problematically control. In the main, the interventions amount to a cynical mobilizing of both unofficial and official information.

And here it should again be noted that the more official disclosures of business, with their powerful aura, can lend some support to their unofficial ones (Gallhofer and Haslam 1991). Business managers have typically led and shaped interventions in respect of social accounting and some pressure has been exerted to preserve or enhance managerial discretion. Even the more positive interventions are scarcely integral to a more holistic progressive strategy. The structural forces are such that little more than this can be expected from business organizations, in the absence of more interventionist regulation. In this regard, the billionaire investor, George Soros, in advocating at least a degree of interventionist regulation in this area, reflects on especially today's competitive context in commenting: 'If individual companies did it (i.e. disclosed more), they would suffer a competitive disadvantage against others that don't do it' (Denny 2002:28). Further, in the interventions of business, principles equating to a concern to problematic the role of a privileged knower and to embrace a differentiated universalism that is respectful of diversity have been distorted. Business organizations monitor and research their stakeholders in terms of their diversity so as to manipulate and control them rather than give them a voice, in effect reinforcing problematic hegemonic forces (Owen et al. 2005). On balance, business social accountings on the face of it are suggestive of an activity to engender more repressive than more emancipatory movement. As public relations' exercises they can be dangerously seductive and mollify advocates of potentially more radical emancipatory accounting possibilities in society in the process.

In more recent times, a number of trends are observable in respect of business disclosure on the one hand and counter-information systems on the other. The shift in the socio-political context towards an anti-interventionist neo-classical polity has meant that social accounting is perceived even less as a threat by the business world (cf. Bailey et al. 1994, Gray et al. 1995a: 62-3, Monbiot 2001). Business increasingly has seen social accounting as a public relations opportunity in an age where increased emphasis has been placed on business image. As global communication in cyberspace has taken off, social accountings have manifested increasingly on the World Wide Web. From the 1980s onwards, business has reflected the increasing concerns about the ecological environment in their social accounting, displacing other social accounting concerns to some extent (Owen et al. 2005, Gray 1999:9). If environmental accountings have in some cases intermeshed with wider social concerns - a tendency that is marked in some forms of sustainability reporting (Elkington 1998) - such social accounting in practice has continued to be disappointing. Environmental and sustainability accountings may have become increasingly evident in practice but critical analysts sum up the way they are seen by using expressions such as public relations' 'greenwash' to summarize their status (Gray and Bebbington 2001).

A number of business organizations today take the public relations' possibilities of social including environmental accounting very seriously, spending substantial sums of money on it. Transnational corporations like Shell and BP have joined the Co-operative Bank and the Body Shop as major investors in social accounting. The reports they have produced, often in addition to the legally required annual report, are significant documents, ostensibly communicating the impact of the company's operations on the community and the environment to a range of different stakeholders, evidencing continuities in the latter regard with the stakeholder models pushed in the 1970s. Indeed, the social reports of transnational companies such as Shell and BP are similar in terms of their form to bodies such as Traidcraft (Owen et al. 2005:82). This similarity of form is on the face of it powerful in creating an aura through which the company is able to hold itself out as socially responsible. The reports differ, however, from Traidcraft in terms of their orientation. Commentators on and critics of this type of social reporting by business have pointed out that these reports contain little of value to stakeholders. Indeed, the way companies portray themselves in their social reports amounts to what has again been called a public relations 'whitewash' or 'greenwash'. As in the social accounting manifestations of the late 1960s and early 1970s, the emancipatory potential of social accounting has been displaced whilst social accounting has been mobilized for counter radical and systems preserving purposes. Although there is more social accounting, with the phenomenon of the World Wide Web of note in this regard, close critical analysis indicates that it has come even more evidently to typify the output of the public relations department (Greer and Bruno 2007, Karliner 1997).

In part, out of frustration over the disappointing interventions of the established accountancy professions in respect of social accounting, ISEA was set up ostensibly as a new and global professional accounting body aiming at the global mobilizing of forms of social accounting that would render business organizations socially and ethically accountable (ISEA 2002). Its aim continues to be to function as a body producing social accounting standards and providing education and training programs to develop professionally qualified social accountants. While a global social accounting profession and practice suggests much potential, there are aspects of ISEA that severely restrict the realizing of this. For instance, the founding membership of ISEA includes business organizations along with 'non-profit' corporate responsibility organizations, consultancies, business ethicist groups and business school faculty. Indeed, the constitution of ISEA's governing body indicates a significant input from business (ISEA 2002b, c). It is thus not surprising that the tone of ISEA pronouncements is one of trusting and engaging in experiments or 'trialing' with business organizations (Zadek et al. 1997:56). Relatedly, ISEA's recommendations in respect of social accounting are much nearer to a mainstream approach than they are to a radical. Current social structures and institutions are scarcely challenged and critique of conventional accounting is somewhat sidestepped (Owen et al. 2005:82). Advocacy of a legislative interventionist stance is largely eschewed and substantially countered, ISEA's pronouncements arguably evidencing the influence of a business rhetoric aimed at 'business friendly regulation':

The adoption of AA 1000 [ISEA's foundation standard in social and ethical accounting, auditing and reporting] can play a part in encouraging governments to acknowledge the self-regulating processes that organizations are following to improve accountability and performance. As a reflection of practical and useful best practice, AA 1000 may also help to ensure that any future regulation in the field is viable and meaningful [emphasis in original].

(ISEA 1999:5)

Critics suggest that, in seeking to gain acceptance from business, ISEA's social accounting fuses with the watered down and problematic versions already found as 'voluntary' public relations exercises in practice (Owen et al. 2005). There are many aspects of ISEA's interventions that indicate a displacement and appropriation of the emancipatory and radical possibilities of social accounting. For instance, although ISEA advocates reporting to a whole range of different stakeholders, it gives considerable power to business management to influence the terms of reference for the participation of stakeholders. The danger here is that a narrow instrumentalism will thus shape the engagement with stakeholders. The way in which ISEA elaborates the aims of stakeholder engagement in its foundation framework Accountability 1000 (AA 1000) is of note in this respect. The executive summary of AA 1000 states that stakeholder involvement 'can be at the center of a honorable circle of [financial] performance improvement' (ISEA 1999:20) Owen et al. (2005:82, 85) in their insightful critique of what they call the 'new social audits' - implicating initiatives such as ISEA - comment critically in this respect on the 'managerial slant to the practice of social auditing'. AA 1000's mobilizing of emancipatory concepts parallels the problematic rhetoric of the empowerment literature in management more generally in that it appropriates radical terms and renders them consistent with a conventional and instrumentalist business strategy. The rhetoric here is powerful, downplaying social conflict and displacing concerns about the operations of capitalistic organizations and social conflict.

Another recent development started in 1997 by the Coalition of Environmentally Responsible Economies (CERES) in co-operation with the United Nations' Environmental Programme (UNEP), the GRI associates social, with stress on environmental, bookkeeping. It explicitly refers to being concerned to 'elevate sustainability reporting practices worldwide to a level…[equivalent]…to financial reporting' (GRI 2002). It published Sustainability Reporting Guidelines in 2000 after these, echoing conventional accounting standards setting procedure, had gone through an Exposure Draft stage a year earlier (GRI 2000). The GRI sought that all organizations adopt a 'triple bottom line' approach to accounting whereby duties to economy, society and the environment - considered the three facets of sustainability - would all be reflected. Organizations were encouraged to use the Guidelines as a framework to demonstrate conformance with the UN's Global Compact principles (The Global Compact 2002). The latter principles, proposed in an address by Kofi Annan, the UN Secretary General, to world business leaders at the World Economic Forum, Davos, 31 January 1999, were aimed at involving business in a compact with society and the environment. In his address, the Secretary General suggested to business leaders that they should 'help build the social and environmental pillars required to sustain the new global economy and make globalization work for the entire world's people'. The Global Compact was aimed at disseminating 'good practice based on universal principles' and focusing upon human rights, labor and the environment (The Gobal Compact 2002). The GRI Guidelines, which seek to impact in part through the Chief Executive Officer's Report or its equivalent, promote reporting on employee welfare and also require statements in respect of profile, vision, strategy, policies and organization and management systems (GRI 2000).