Social accounting: what is it and why does it matter?

Monday, March 11, 2019

When we hear the word accounting, we conjure up all sorts of things. Books filled with numbers, calculators, software, the idea of accountability. If you’re working as part of a nonprofit, you may think of the differences between nonprofit accounting and more traditional business accounting. It might stress you out or, if you’ve got a handle on your books, bring a feeling of peace.

It’s a pretty loaded word, no matter your stance. But have you heard of social accounting? For many, this lesser known term is a crucial part of evaluating and reporting on nonprofit success.

So what exactly is it?

First, it is important to note that social accounting is still accounting. It might seem a little more complicated than traditional nonprofit accounting at first, but it is simply different. And, while there are many definitions available for social accounting, it is essentially the process of evaluating and publicizing the less measurable parts of an organization’s actions--think social and environmental. Think less books and more people, a look at performance as it relates to service within a community or population.

Perhaps the simplest way to define and describe social accounting is to say that it looks at the less quantitative values of a company—the things that might make us want to work or purchase from an organization.

Measuring the unmeasurable

While it is relatively simply to look at money in versus money out, it is infinitely more difficult to provide an assessment of other factors which may influence environment. Social accounting seeks to reflect on the actions of a company in actual accounting practices, but is more inclusive, including things like in-kind donations and volunteer hours that traditional accounting may leave out.

The goals of social accounting are to honor a stakeholder’s right to information, balance power and responsibility, increase organizational transparency, and identify the social and environmental costs of traditional (economic) success.

What it looks like

In practice, social accounting can look a few different ways. Often, companies who practice social accounting product annual reports that detail corporate responsibility. These reports are presented to board members and are usually published under a “corporate responsibility” tag and are often looked at by donors who hope to support responsible organizations.

Social accounting looks at a company’s social responsibilities, their use of social resources, the relationship between a company and society, the need for the organization in society, and the social costs versus social benefits of an organization.

Benefits of social accounting

As you can imagine, social accounting is especially beneficial to nonprofit organizations, assuming they’re working toward a community driven mission. First, it allows the public to see good work directly from the source. It provides insights to management and forces a company to think about their decisions and make better ones as a result of potential scrutiny. It can improve image, and help with marketing efforts, as well as instill confidence in an organization.

For nonprofits, social accounting can help place value on things that they already value. When we use a term like accounting to describe issues more in line with social science, it creates value, and for nonprofit organizations, this is essential.

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