The history of Social Stock Exchange (SSE) is not longer than a decade. It’s a novel social and economic phenomenon. The object of introduction of Social Stock Exchange is to attract social investors to participate in financing Social Enterprise. SSE serves as a mediator between social enterprises that need funding and investors who are willing to invest their money for social causes. Thus, SSE provides a platform for trading of securities of Social Enterprise. Securities and Exchange Board of India with a view to improve visibility and knowledge, among stakeholders like investors, promoters, directors, officers of the Social Enterprise, regulators, government authorities, financial institutions, banks, creditors and common public, vide regulation 91E of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 introduced the concept of Social Audit.
ICSI takes this opportunity to introduce the ICSI – Social Audit Standards formulated for the purpose of providing guidance to conduct Social Audit of a Social Enterprise engaged in any of the activities as enumerated under Regulation 292E(2) (a) of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements), Regulations, 2018.
The purpose of Social Audit is to ascertain the impact made by the Social Enterprise through its activities, intervention, programs or projects implemented during the reporting period. ICSI’s Standards (ICSI SAS) on Social Audit are to be applied in the assessment of impact made by Social Enterprise. The Social Audit must be performed by a Social Auditor and must comply with certain standards. It involves performing procedures on the impact made by the Social Enterprise. These procedures are designed to identify impacts made by the Social Enterprise on target area during the reporting period. It helps the stakeholders in understanding the project and its impact on target section, challenges and mitigation measures. The methodology adopted for this Social Audit is both qualitative and quantitative data evaluation.
Social Audit Standards are written in the context of assessment of impact by an independent Social Auditor. The objective of Social Audit is to enable the auditor to express an opinion whether the activity, intervention, program or projects implemented by the Social Enterprise in all material respects are in accordance with the fund raising document and other applicable laws and regulations. It is undertaken to enhance the degree of confidence of intended users in the activity, intervention, program or projects. ICSI Social Audit Standards, taken together, provide the standards for the Social Auditor’s work in fulfilling this objective.
About ICSI Institute of Social Auditors (IISA)
ICSI Institute of Social Auditors is a self-regulatory organisation and was incorporated on 4th October, 2022 with an object to develop guidelines, rules and standards for the effective impartial assessment of impact made by Social Enterprise. It also aims to regulate the Social Auditors to be empaneled with ICSI Institute of Social Auditors for conducting Social Audit as per the Social Audit Standards issued by ICSI.
Introduction – An Overview of Social Audit
Social Audit is a novel concept and its impartial systematic process allows stakeholders to assess the impact made by the Social Enterprise through its intervention, program or projects and identify the gap between desired object and actual impact made by the Social Enterprise during the reporting period. It also aims to aid regulators for the effective implementation of applicable laws, rules and regulation and also to the general public to take informative decision while making any investment in securities of Social Enterprise.
Regulation 91E of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, mandates Social Audit of Social Enterprise engaged in the activities specified under regulation 292E (2) (a) of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018.
An understanding of the issues related to social, economic and cultural factors of the target area or people is critical in the formulation and implementation of intervention, program or projects by every Social Enterprise. A detailed Social Audit therefore needs to be carried out to analyse and understand the impact made by existing intervention, program or projects and also make project design responsive to social development
concerns in future. Social Audit also helps in enhancing the project benefits to poor and vulnerable people while minimizing or mitigating concerns, risks and adverse impacts. The main objective of the Social Audit is to analyse and understand whether the intervention, program or projects implemented by the Social Enterprise addressed the intended or desired object or goal in an effective manner and produced positive impact to the target area or people.
Objectives and Scope of Social Audit
Objectives
The main object of Social Audit is to ascertain the impact made by the Social Enterprise through its activities, intervention, programs or projects implemented during the reporting period. It will also analyse whether the implemented activities, intervention, programs or projects has addressed the challenges set at the implementation stage or those mentioned in the fund raising documents. The impact report aims to highlight the positive impact made to the target area, unintended negative impact and gap between desired object and actual impact made by the Social Enterprise during the reporting period. The main objects of Social Audit are as follows;
- Assessing the impact made by the Social Enterprise through implementation of activities, intervention, programs or projects;
- Verifying the authenticity and validity of implementation of activities, intervention, programs or projects;
- To identify and report the gap between desired object and actual impact made by the Social Enterprise;
- Assessing the nature, intensity and duration of impact of the project;
- Evaluating the cost and efficiency of the projects/ interventions being carried out by the Social Enterprise;
- Evaluating the unintended effects and how to use the experience from the running projects to improve the design of future projects;
- Verifying whether all the statutory requirements are fulfilled or not.
Scope
- Different projects may have a very different list of social issues. The Social Auditor is to exercise his own technical judgement to determine which issues should be subject to inquiry. The minimum issues which must be addressed by the Social Auditor are enumerated as under:
- Will the project significantly impact the economic, environment and social condition of the local community?
- Will there be a significant change in the general access that the communities have to natural resources, such as drinking water and energy?
- Does the local community have effective governance mechanisms to deal with the long-term effects of the project?
- Are there groups (indigenous groups, women, ethnic minorities, LGBTQIA+ and so on) who will be differentially impacted by the project?
- Will the project increase or decrease the demand for services, such as education or health?
- Will the project produce any population or demographic movement, such as the change in size of the communities affected by the project?
Above questions can help the auditor and the Enterprise to determine the extent of the impact, as well as any unmanageable social obstacles ahead of the project. This allows for the anticipation of any adverse significant social effects of the infrastructure and for avoiding, minimizing, or offsetting them.
Mandatory nature of framework and standards
These Social Audit Standards are applicable to all Social Auditors empanelled with the ICSI Institute of Social Auditors who undertake the Social Audit assignment as per the relevant provisions of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 and other relevant provisions notified from time to time. The Standards are formulated for the effective assessment of impact made by the Social Enterprises through the following interventions, programmes or projects identified and notified by Securities and Exchange Board of India vide Regulation 292E (2) (a) of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018;
i. Eradicating hunger, poverty, malnutrition and inequality;
ii. Promoting health care including mental healthcare, sanitation and making available safe drinking water;
iii. Promoting education, employability and livelihoods;
iv. Promoting gender equality, empowerment of women and LGBTQIA+ communities;
v. Ensuring environmental sustainability, addressing climate change including mitigation and adaptation, forest and wildlife conservation;
vi. Protection of national heritage, art and culture;
vii. Training to promote rural sports, nationally recognised sports, Paralympic sports and Olympic sports;
viii. Supporting incubators of Social Enterprises;
ix. Supporting other platforms that strengthen the non-profit ecosystem in fundraising and capacity building;
x. Promoting livelihoods for rural and urban poor including enhancing income of small and marginal farmers and workers in the non-farm sector;
xi. Slum area development, affordable housing and other interventions to build sustainable and resilient cities;
xii. Disaster management, including relief, rehabilitation and reconstruction activities;
xiii. Promotion of financial inclusion;
xiv. Facilitating access to land and property assets for disadvantaged communities;
xv. Bridging the digital divide in internet and mobile phone access, addressing issues of misinformation and data protection;
xvi. Promoting welfare of migrants and displaced persons;
Social Audit Standards for other items, if any, identified by the Securities and Exchange Board of India or Government of India from time to time, will be notified as and when the items are notified by the Securities and Exchange Board of India or Government of India.
The Social Auditors empanelled under IISA shall maintain and preserve the records and evidences collected in the course of Social Audit for a minimum period of eight (8) years from the date of the respective Social Impact Assessment Report.
Benefits or advantages of Social Audit
- Financial data on social activities/ programs/ interventions: Social Audit assesses the source of funding, its utilisation and appropriate reporting to the Governing Body of the Social Enterprise.
- Encourage for social performance: Social Audit assesses the impact of the activities undertaken and brings the social point of view to the attention of the management, and thus encourages the Social Enterprise to perform better.
- Improve relationships with Stakeholders: By Implementing the auditors’ recommended improvements, it helps the Social Enterprise to meet stakeholder expectations, enabling it to build a good relationship with them in the long term.
- Comparison of different activities: The Social Audit provides data for comparing effectiveness of different types of social welfare programmes undertaken and this further enables to assess which activity has better social impact.
- Enhances Social Reputation: Social Audit helps the organization to build up the image and reputation of the organization in the minds of the public.
- Sense of Social Responsibility among Shareholders and Community as a whole: Social Audit helps shareholders as well as other stakeholders realize the importance of socially beneficial programmes and extend their cooperation to the Social Enterprise’s programmes of social welfare and development.
Challenges of Social Audit
- Time Consuming Process: It requires time and efforts in setting social accounting systems in the enterprise;
- Costly: Indulging outside resources like interviewers, auditors and stakeholders may be costly affair;
- Identification of Target Population/Area: The Social Enterprise may find it difficult to identify the target population/ area and ensure that the targeted population/area is being benefitted from the activity/ program/ intervention;
- Collection of Data: The collection of relevant data, facts and figures may be a challenging task for auditor in case of different activities being undertaken by the Enterprise;
Definitions
a. Activity/ Program/ Intervention: “Activity/ Program/ Intervention” means any of the activities enumerated under Regulation 292E(2)(a) of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements), Regulations, 2018, in which a Social Enterprise is engaged, making it eligible under Chapter X-A of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements), Regulations, 2018.
b. Fund raising document: “Fund raising document” means the draft fund raising document and the final fund raising document.
c. Social Audit: “Social Audit” means an independent, qualitative and quantitative assessment regarding a Social Enterprise engaged in any of the activity enumerated under Regulation 292E(2)(a) of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements), Regulations, 2018. It reaffirms the primacy of the social intent of a Social Enterprise and brings a systematic and disciplined approach to evaluate and improve the effectiveness of impact of the social activity.
d. Social Auditor: “Social Auditor” means an individual registered under ICSI Institute of Social Auditors or such other agency, as may be specified by the Securities and Exchange Board of India, who has qualified a certification program conducted by National Institute of Securities Market and holds a valid certificate.
e. Social Enterprise: “Social Enterprise” means either a Not for Profit Organization or a For Profit Social Enterprise that meets the eligibility criteria specified under Chapter X-A of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements), Regulations, 2018.
f. Social Stock Exchange (SSE): “Social Stock Exchange” means a separate segment of a recognized stock exchange having nationwide trading terminals permitted to register Not for Profit Organizations and / or list the securities issued by Not for Profit Organizations in accordance with the provisions of Chapter X-A of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements), Regulations, 2018.
g. Target Population/ Area: “Target population/ Area” means the group of individuals that the program/ activity/ intervention intends to provide benefit to, particularly the underserved or less privileged population segments or regions recording lower performance in the development priorities of Central or State Governments.
Annexures
i. Draft Format of Annual Impact Report (Annexure I).
ii. Social Audit Standards (Annexure II)
ANNEXURE I
(Name of the Social Enterprise)___________
Draft Format of Annual Impact Report
For the year ended/Period________
Prepared by
_ (Name, Membership Number/FRN and address
of Social Auditor)
TABLE OF CONTENTS
Executive Summary
Introduction
Background and scope of the of the Engagement
Object of Social Audit
Basis of opinion
Responsibilities
Other information
Description of Project
Details of activity, intervention, program or projects
Details about target section
Mode and Details of implementation
Approach and Methodology
Defining the scope of the Social Audit
Choose the stakeholders for the process
Define the issues to be checked in the process
Reporting
Findings
Key Findings
Alignment with the national/state priorities
Opinion
Gaps or challenges
Recommendations
Annexures
Material evidence, if any, essential for supporting Social Impact Assessment Report
Case Studies or Stakeholders speak
Any other relevant documents
EXECUTIVE SUMMARY
To,
The Members of ______________________(Name of Social Enterprise)
This Annual Impact Report deals with the impact generated by___ (Name of Social Enterprise) in the field of _____(mention the activities notified by SEBI) , _________________ and the activities which have been notified by Securities and Exchange Board of India vide Regulation 292E (2) (a) of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018. The Social Enterprise _______________ (Name of the Social Enterprise) was established on ___ (date) ____ (year) as ______ (constitution of the Social Enterprise). The Social Enterprise is located at ______ and having business ______________________ details of business or activity) at_________ , _ and .
The Social Enterprise is engaged in the field of _______________ , ___ and
________ (activity) during the reporting period and made impacts/
contributions to the target area by indulging in;
1. ___________
2. __________
3. _________
4. ________
The status of the target section of the above mentioned activities prior to the implementation was, _____________ . Improved (mention the area in which the initiatives made improvements)________________ , & is identified as the impact of the intended object or goal of the Social Enterprise. The project has selected (specific areas of each project to mention) ____________ , _______ and__________ as the key focus areas for the betterment of the target section and implemented its activities by its own/through third party.
Social Audit serves as useful tool in finding out of impact on the target section by the implementation of activity, intervention, program or projects. It helps the stakeholders in understanding the project and its impact on target section, challenges and mitigation measures. The methodology adopted for this assessment is both qualitative and quantitative data evaluation. This report describes the project location, baseline scenario, potential impacts of the project on the target section and proposed measures for effective following up during the project cycle.
INTRODUCTION
A. Background and scope of the of the Engagement
__________ (Name of the Social Enterprise) is established in the year _____ under (law under which the Social Enterprise is registered) vide Registration No________________________ . The main object of the Social Enterprise is _____________________________________________________he_____________________________________________________ Social Enterprise is registered/ registered and raised funds under the regulations of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018, Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 and other applicable laws, regulations, rules, etc. The Social Enterprise has engaged in , & activities, interventions, programmes or projects, specified under Regulation 292E (2) (a) of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018, to address the anomaly experienced by the target section.
We were appointed by Board of Directors/Governing Body of____________(Name of the Social Enterprise) vide resolution/engagement letter dated___ /________________________________________________________ /20__
to assess the impact made by Social Enterprise through various activities, interventions, programmes or projects during the reporting period. We remain independent of the Social Enterprise in conducting Social Audit entrusted on us. [Indicate any services, in addition to the Social Audit, which were provided by the firm/auditor to the Social Enterprise) that have not been disclosed in the Impact Assessment Report].
B. Object of Social Audit
This report presents the impact made by the Social Enterprise in the field of ,_________________ &___________ to the target section during the reporting period. The objectives of the study are being enumerated as under:
a) To assess the outcomes and impact created on the stakeholders covered under the project;
b) To assess the nature, intensity and duration of impact of the project;
c) To ensure that the impacts of projects are adequately and appropriately considered and mitigation measures for adverse significant impacts incorporated when decisions are taken;
d) To evaluate the cost and efficiency of the projects/ interventions being carried out by the Social Enterprise;
e) To evaluate the unintended effects and how to use the experience from the running projects to improve the design of future projects.
f) To ensure that the funds raised have been utilised for the intended purpose.
C. Basis of Opinion
We conducted Social Audit for the period from _____ to_____________________________________________________ in accordance with the Standards issued by Institute of Company Secretaries of India (ICSI) and other applicable relevant laws. Our responsibilities under those standards are further described in the part “Responsibilities” for the Social Audit of the projects. We are independent of the Social Enterprise in accordance with the requirements specified by SEBI that are relevant to our Social Audit of the Social Enterprise’s activities, interventions, programmes or projects, specified under Regulation 292E(2)(a) of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018, and we have fulfilled our other ethical responsibilities in accordance with the requirements specified by respective statutory authorities. We believe that the Social Audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
D. Responsibilities
Auditor’s Responsibility
We have been appointed as Social Auditor to conduct Social Audit pursuant to Regulation 91E of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, Social Audit Standards issued by ICSI and other relevant applicable Acts and Regulations.
Our objectives are to obtain reasonable assurance about whether the Impact Report as a whole and opinion are free from material misstatement, whether due to fraud or error.
Details of the extent to which the audit was considered were capable of detecting irregularities, including fraud and non-compliance with relevant laws and regulations.
Responsibilities of the Social Enterprise
The Social Enterprise must make available all the necessary information and records as and when required by the Social Auditor for Social Audit. It is the responsibility of the Social Enterprise to produce necessary documents and details to the Auditor while the Social Audit is being carried out by the auditor and the veracity of the information is the sole responsibility of the Social Enterprise. The details and data may include the following and but are not limited to:
a) All budget allocations, beneficiary lists, muster rolls, bills, vouchers, accounts, etc. must be available for scrutiny;
b) All applications for licenses/permits and certificates issued by local government institutions must have a serial number. Registers indicating date of application and date of clearance in each case should be made available for reference;
c) The Social Enterprise must provide true information and records to the auditor for Social Audit;
d) Such other data the Auditor thinks necessary for the completion of the Social Audit.
E. Other information
Any other information which are relevant in the opinion of Social Auditor may be reported.
DESCRIPTION OF PROJECT
A. Details of activity, intervention, program or projects
Details of various activity, intervention, program or projects implemented to be reported.
B. Details about target section
Details of target section including location and volume/number of, outreach, status prior to implementation.
C. Mode and Details of implementation
The details of implementation should include whether the implementation is directly or through an outside agency.
APPROACH AND METHODOLOGY
a) Defining the scope of the Social Audit: It involves the assessment of all the projects in addition with departments of the Social Enterprise, at the same time. Therefore, we have to decide accordingly which part is to be assessed and which not;
b) Choose the stakeholders for the process: The key stakeholders who can be involved in the audit process include project beneficiaries, Elected Representatives, officials of the local bodies, Civil Society Organizations (CSOs), media, etc. The consultation must be done with the stakeholders to extract accurate and needed information;
c) Define the issues to be checked in the process: Identify the issues which are to be checked in audit process. The minimum issues to be checked may be adopted from the Social Audit Standards that may be prescribed from time to time. Own discretion and judgement should also be exercised by the Social Auditor depending on the activity being undertaken by the Social Enterprise;
d) Make procedure for data collection of issues: There may be various procedures and various sources to collect the data like sampling, conducting interviews, conducting Questionnaires and surveys, primary source like obtaining direct information from the Enterprise, secondary source like published data from authorised sources etc.
e) Reporting: The Impact Report should be detailed with overall findings and should also mention the suggestions for improvements in the projects being undertaken by the Social Enterprise. It should contain an unbiased and genuine opinion on the impact created on the target segment by the Social Enterprise through its project. It should be addressed to the Appointing Authority unless otherwise specified in the Engagement Letter or provided in the applicable law and in the format specified, if any.
FINDINGS
A. Key findings
The Social Auditor must mention in the Impact Report his/her key observations to each project along with his recommendations to improve the execution of the project, increase the reach of targeted population and outcome of the project in up-coming future. The findings may be based on the following parameters:
|
Activity, |
Parameters | Extremely Satisfactory |
Satisfact ory |
Not Satisfact ory | Justifica tion for observat ions |
| 1. | Relevance of the Project |
||||
| Effectivene ss of the Project |
|||||
| Efficiency of the Project |
|||||
| Impact of the Project | |||||
| Sustainabil ity of the Project |
B. Alignment with the national/state priorities
Social Auditor shall analyse and report whether the implemented activities are aligned with national or state priorities.
OPINION
A. Gaps or challenges
The Social Auditor should mention in his report the limitations/ challenges/ gaps faced by him in each project during data collection, analysis and preparation of the Impact Report. This would help the Enterprise to improve upon the activity being carried upon and its future impact on the society overall.
B. Recommendations
The Social Auditor may recommend the Social Enterprise to take corrective steps to ensure that the projects have better social impact on the targeted population.
ANNEXURES
A. Material evidence, if any, essential for supporting Annual Impact Report.
B. Case Studies or Stakeholders Speak.
C. Any other relevant documents.
For and on behalf of__________ (Name of Social Audit Firm)
Signature of Social Auditor
Name and Registration No.
Place :
