CHAPTER ONE

INTRODUCTION

1.1   BACKGROUND TO THE STUDY

In the era of corporate social responsibility, where corporations are often expected not just to deliver value to consumers and shareholders but also to meet environmental and social standards deemed desirable by some vocal members of the general public including the host communities, social auditing can help companies create, improve and maintain a positive public relations image. In essence, social auditing will enhance rural development by means of corporate social responsibility by companies (Zadek, Pruzan & Evans, 1997).

Social auditing also entails a formal review of a company's endeavors in social responsibility. A social audit looks at factors such as a company's record of charitable giving, volunteer activity, energy use, transparency, work environment and worker pay and benefits to evaluate what kind of social and environmental impact a company is having in the locations where it operates (Zigga, 2003). Social audits are optional i.e. companies can choose whether to perform them and whether to release the results publicly or only use them internally. It also involves the process of evaluating a firm's various operating procedures, code of conduct, and other factors to determine its effect on a societal development. The goal is to identify what, if any, actions of the firm have impacted the society in some way. A social audit may be initiated by a firm that is seeking to improve its cohesiveness or improve its image within the society by means of contributing to the development of the community. If the results are positive, they may be released to the public (Wikipedia, 2015). For example, if a factory is believed to have a negative impact, the company may have a social audit conducted to identify actions that actually benefit the society.

Companies around the globe are beginning to assess their social performance and report the results of those assessments as a means of demonstrating their commitment to social responsibility. These audits can help companies identify risks, noncompliance with laws and company policies, and areas that need improvement. As a result, it can be used as a tool for rural development. An audit should provide a systematic and objective survey of the firm’s ethical culture and values. Audits can also spotlight social responsibility activities and accomplishments related to environmental impact, sustainable development, consumer welfare, fair trade, treatment of employees, and relationships with other stakeholders. These reports are often called “social audits,” “social responsibility reports,” or “corporate citizenship audits (Zadek, Pruzan & Evans, 1997).”

Regardless of what name they go by, the reports of such auditing efforts are important for demonstrating a firm’s commitment to and ensuring the continuous improvement of its social responsibility efforts. Without reliable measurements of the achievement of social objectives, a company has no concrete way to verify their importance, link them to organizational performance, justify expenditures to stockholders and investors, or address any stakeholder concerns.

Social auditing are tools that companies can employ to identify and measure their progress and challenges to stakeholders—including employees, customers, investors, suppliers, community members, activists, the media, and regulators—who are increasingly demanding that companies be transparent and accountable for their commitments and performance.

The auditing process is important to business because it can improve financial performance, increase attractiveness to investors, improve relationships with stakeholders, identify potential liabilities, improve organizational effectiveness, and decrease the risk of misconduct and adverse publicity. A firm’s reputation depends on transparency and openness in reporting and improving its activities. The social audit provides an objective approach for an organization to demonstrate its commitment to improving strategic planning, including showing social accountability and commitment to monitoring and evaluating social issues. Thus, it is critical that top managers understand and embrace the strategic importance of the social audit in order to contribute to the development of their host communities. Key stakeholders of the company should also be involved in the audit to ensure the integration of their perspectives into the firm’s economic, legal, ethical, and philanthropic responsibilities (Waddock & Smith, 2000). Companies are working to incorporate accountability into actions ranging from long-term planning to everyday decision making, including corporate governance, financial reporting, and diversity. The strategic responsibility goals and outcomes measured in the social audit need to be communicated throughout the organization and to all of its stakeholders so that everyone is aware of what the company would like to achieve and what progress has been made in achieving its goals. The social audit should provide regular, comprehensive, and comparative verification of the views of stakeholders. Disclosure is a key part of auditing to encourage constructive feedback. Directions for finding best practices and continuous improvement on legal, social, ethical, philanthropic, and other issues can come from all stakeholders (Waddock & Smith, 2000).

1.2   STATEMENT OF THE PROBLEM

Stakeholders are demanding increased transparency and are taking a more active role in communicating their expectations and asking for corporate accountability on a variety of issues. Government regulators are calling on companies to increase the quantity and quality of information disclosed aimed at increasing the companies’ accountability to society. For example, the Sarbanes-Oxley Act requires top financial officers to file their company’s code of ethics with the Securities and Exchange Commission. A number of financial and auditing decisions must also be reported on a regular basis.

In general, social auditing is not usually associated with regulatory requirements, whereas financial audits are required of public companies that issue securities. Because social audits are more voluntary, there are fewer standards that a company can apply with regard to reporting frequency, disclosure requirements, and remedial actions that it should take in response to results. This may change as more companies build ethics and social responsibility programs in the current environment. However, this study is examining social auditing as a tool for enhancing rural development in Nigeria.

1.3   OBJECTIVES OF THE STUDY

The following are the significance of this study:

1.  To examine social auditing as a tool for enhancing rural development in Nigeria.

2.  To examine the level of practice of social auditing by Exxon Mobil Eket.

3.  To identify the benefits of social auditing to rural area and host communities.

1.4   RESEARCH QUESTIONS

1.  Can social auditing be used as a tool for enhancing rural development in Nigeria?

2.  What is the level of practice of social auditing by Exxon Mobil Eket?

3.  What are the benefits of social auditing to rural area and host communities?

1.5   HYPOTHESIS

HO: There is no significant relationship between social auditing and rural development in Nigeria

HA: There is significant relationship between social auditing and rural development in Nigeria

1.6   SIGNIFICANCE OF THE STUDY

The following are the significance of this study:

1.  The outcome of this study will educate the managers of companies, stakeholders and the general public include companies host communities on the rudiments of social auditing and its effect on rural development.

2.  This research will be a contribution to the body of literature in the area of the effect of personality trait on student’s academic performance, thereby constituting the empirical literature for future research in the subject area.

1.7   SCOPE/LIMITATIONS OF THE STUDY

The study will cover the practice of social auditing by Exxon Mobil Eket and its effect on rural development.

Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

 Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

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