Module 4

Social environment of business means all factors which affects business socially. Every
business works in a society, so societies different factors like family, educational institutions and
religion affects business. Social environment of business means all factors which affects business
socially. Every business works in a society, so societies different factors like family, educational
institutions and religion affects business. It includes the culture that the individual was educated
or lives in, and the people with whom they interact. The cultural factors like buying and
consumption habit of the people, customs and traditions, tastes and preferences, languages etc.
are the factors that affect the strategy of the business.

The cultural environment mean a environment which affect the basic values, behaviours,
and preferences of the society-all of which have an effect on consumer marketing decisions.
Socio-cultural environment is a set of beliefs, customs, practices and behaviour that exists within
a population. International companies often include an examination of the socio-cultural
environment prior to entering their target markets.

Factors which effect social and cultural environment

 Attitude of people.
 Technological Factor.
 Demographic Factor.
 Income & Life Style.
 Religion: Religion is also effects the business socially. Religion means the
system in which group of persons trust in God. Different religions have different
principles, rules and regulations in which they sacrifice to use some products and
to eat some food, In Hindu religion, they never use leather products. They affects
the sale of leather industries. So, businessman must analyse the targeted audience
and after listening their religious thoughts, he should produce the goods.
 Health & Safety Factor.
 Social Responsibility.
 Taste & Preference.
 Education : Educational institutions are also main part of societies . They provide
good knowledge, education, awareness, thinking, what should students buy or not
to buy . Suppose if a student is habitual to drink the tea and if his teacher advice
him that this is harmful to his health after his guidance students can avoid to
drink tea after this the sale of tea will decrease .
 Family. : Family is basic part of society from the birth of a person and up to
death. He lives in family so personal decision of buying and selling of goods are
affects from family. In the culture of a family, it may happen that parent does not
allow to use any product, then sale of such product will decrease. So businessman
must analyze different families needs. Many occasion of family like marriage of
any family member, can increase the demand of goods .
 Natural Factor.

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Acc. To Taylor “ Culture of civilization is that complex whole which includes, belief, art,
morals, law, custom knowledge and other capabilities and habits acquired by man as a member
of the society.”

ELEMENTS OF CULTURE :

1. Knowledge & beliefs – Includes myths , beliefs & scientific realities.

2. Ideals – refers to societal norms which define what is expected, customary, right in given
situation.
3. Preferences – Things which are attractive or unattractive as objects of desire.
4. Cultural Adaptation – Term refers to the manner in which a social system or an
individual fits into physical or social environment. Eg. While introducing new products,
techniques, ideas, segmentation one should consider the extent to which the different
categories of consumers adapt to the new things or environment.
a. Cultural Shock – Environmental changes sometimes produce culture shock which
leads to confusion, insecurity and anxiety caused by strangeness of new
environment.

5. Cultural Transmission – The elements of culture are transmitted among the members of the
culture from one generation to the next and to the new members admitted in the society. As the
time goes culture accumulate more techniques, ideas, product and skills. Literature, Film, T.V,
Social institutions, advertising, mkting techniques, etc. play a important role in cultural
transmission.

6. Cultural Traits :- 1. Masculine & Feminine Culture 2. Universalism vs. Particularism

3. Individualism vs. Communitarianism 4. Neutral vs. Emotional

7. Religion – The cost of ignoring certain religious aspects could be very high, sometimes fatal
in international business. E.g.. 1 – When an American fast food chain was planning to enter
India, one political party stated that it would oppose the mkting of beef product in the country.
E.g. 2 – Christians do not consume non-veg during lent (50 days preceding Easter). E.g.. 3 –
Most Hindus do not purchase goods during Rahu-Kala . E.g. 4. – The Islamic holy book Koran
prohibits payment & acceptance of interest. Islamic banks do not pay interest to the depositors
nor they charge interest to borrowers .Rather the banks share the profit with depositors. The
profit sharing ratio is fixed. E.g. 5. – The customs of marriage, naming ceremony of child,
festivals etc. wary significantly between religions. These have implifications for many types of
business like textiles, jewellery, catering, consumer durables etc..

8. Ethno domination – In many countries one or other industry or trade is dominated by certain
ethnic groups. E.g. 1 – The automobile spare parts business in India is dominated by Sikhs.
E.g. 2 – Punjabi restaurant's, chinese resturants, Udupi restaurants are popular in several
countries. E.g. 3 – The business in India is particularly dominated by Vaishya Community.

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9. Language – Differences in language is a very important problem area in business. E.g. 1 –
Ford’s third word truck brand name Fiera meant “Ugly old woman” in Spanish. E.g. 2 – The
Arabic language is read from right to left and many Arabians sequence things from right to left.
A multinational blundered in the middle east when in the advertisement of its detergent it
pictured soiled clothes on the left, the box of detergent in the middle and clean clothes on the
right.

10. Consumer Preferences, Habits and Beliefs What is most likes by people of one culture may
not be liked by those of other culture. Many companies modify their products and promotion
strategies to suit the tastes and preferences of the population of other countries. E.g. 1 – Nescafe
has a 3/4 share in Mumbai but poor mkt. share in Banglore & South whereas Bru has a good
market share in Banglore and not in Mumbai & North India. The reason is Nescafe add. projects
cosmopolitan image of the product whereas Bru add. projects South Indian family particularly
Tamil nadu culture. E.g. 2 – Even when a product serves the same purpose, the relative
importance of various product attributes may differ b/w markets. Goodyear tyres for example
stress tyres safety in Britain, durability and mileage in U.S and agile performance in Germany
E.g. 3 – Headless shrimps are sold primarily in Europe but not in Spain. E.g. 4 – It is pointed out
that much better quality of packaging is needed in Japan than in U.S. as U.S peoples sees the
pack as a means of getting the product home.

Social and cultural environment refers to the influence exercised by certain social factor
which are “beyond the companies gate” Culture refers to dance, drama, music and festival
include Knowledge, belief, art, moral, law, customs & others capability

Following characteristic of culture are

1. Learned : Culture is not inherited or biologically based, it is acquired by

learning and experience
2. Shared : People are member of a group, organisation, or society share culture, it
is not specific individual.
3. Tran generational : Culture is passed on from one generation to the next.
4. Symbolic: Culture is based on the human capacity to symbolic or use one thing
that represent another.
5. Adaptive : Culture is based on the human capacity to change or adapt, as
opposed to the more genetically driven driven adaptive process of animals.

Factors which effect social and cultural environment

 Attitude of people  Education

 Attitude of wealth  Ethics
 Marriage  Social Responsibility
 Religion

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The Effects of Socio-Culture on Business

Businesses do not exist in a vacuum, and even the most successful business must be
aware of changes in the cultures and societies in which it does business. As society and culture
change, businesses must adapt to stay ahead of their competitors and stay relevant in the minds
of their consumers.

Changing Preferences

A major socio-cultural factor influencing businesses and business decisions is changing

consumer preferences. What was popular and fashionable 20 years ago may not be popular today
or 10 years down the road. Different styles and priorities can undermine long successful products
and services. For example, a clothing company must constantly be aware of changing
preferences when creating new products or it will quickly become outdated.

Demographics

Changes in demographics are also a significant factor in the business world. As populations age,
for example, markets for popular music and fashions may shrink while markets for luxury goods
and health products may increase. Additionally, changes in the proportion of genders and
different racial, religious and ethnic groups within a society may also have a significant impact
on the way a company does business.

Advertising Techniques

Advertising is perhaps the area of business most closely in touch with socio-cultural changes.
Advertising often seeks to be hip and trendsetting, and to do this, advertising agencies and
departments cannot lose track of the pulse of the societies in which they engage in business.
Changes in morals, values and fashions must all be considered when creating outward facing
advertising.

Internal Environment

In addition to a company's interactions with the market and its customers, socio-cultural factors
also impact a company's internal decision-making process. For example, changing gender roles
and increasing emphasis on family life have led to increased respect for maternity and even
paternity leave with organizations. Additionally, attitudes towards racial discrimination and
sexual harassment have changed drastically over the years as a result of socio-cultural change.

Elements of Social Structure and Culture

Although society surrounds us and permeates our lives, it is difficult to "see" society. By
thinking of society in terms of a picture or image, however, we can visualize society and
therefore better understand it. Imagine that society is a coin with two sides: on one side is the
structure of society, and on the other is the culture of society. Although each "side" is distinct,

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both are inseparable from the whole. By looking at the various elements of social structure and
culture, we can better understand the root cause of social problems. 

Elements of Social Structure

The structure of society refers to the way society is organized. Society is organized into different
parts: institutions, social groups, statuses, and roles.

Institutions An institution is an established and enduring pattern of social relationships. The

five traditional institutions are family, religion, politics, economics, and education. but some
sociologists argue that other social institutions, such as science and technology, mass media,
medicine, sport, and the military, also play important roles in modern society. 

Many social problems are generated by inadequacies in various institutions. For example,
unemployment may be influenced by the educational institution's failure to prepare individuals
for the job market and by alterations in the structure of the economic institution.

Social Groups Institutions are made up of social groups. A social group is defined as two or
more people who have a common identity, interact, and form a social relationship. For example,
the family in which you were reared is a social group that is part of the family institution. The
religious association to which you may belong is a social group that is part of the religious
institution. 

Social groups may be categorized as primary or secondary. Primary groups, which tend to

involve small numbers of individuals, are characterized by intimate and informal interaction.
Families and friends are examples of primary groups. Secondary groups, which may involve
small or large numbers of individuals, are task-oriented and characterized by impersonal and
formal interaction. Examples of secondary groups include employers and their employees and
clerks and their customers. 

Statuses Just as institutions consist of social groups, social groups consist of statuses. A status is
a position a person occupies within a social group. The statuses we occupy largely define our
social identity. The statuses in a family may consist of mother, father, stepmother, stepfather,
wife, husband, child, and so on. Statuses may be either ascribed or achieved. An ascribed
status is one that society assigns to an individual on the basis of factors over which the
individual has no control. For example, we have no control over the sex, race, ethnic
background, and socioeconomic status into which we are born. Similarly, we are assigned the
status of "child," "teenager," "adult," or "senior citizen" on the basis of age--something we do not
choose or control. 

An achieved status is assigned on the basis of some characteristic or behavior over which the
individual has some control. Whether or not you achieve the status of college graduate, spouse,
parent, bank president, or prison inmate depends largely on your own efforts, behavior, and
choices. One's ascribed statuses may affect the likelihood of achieving other statuses, however.
For example, if you are born into a poor socioeconomic status you may find it more difficult to
achieve the status of "college graduate" because of the high cost of a college education. 

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Every individual has numerous statuses simultaneously. You may be a student, parent, tutor,
volunteer fundraiser, female, and Hispanic. A person's master status is the status that is
considered the most significant in a person's social identity. Typically, a person's occupational
status is regarded as his or her master status. If you are a full-time student, your master status is
likely to be "student."

Roles Every status is associated with many roles, or the set of rights, obligations, and
expectations associated with a status. Roles guide our behavior and allow us to predict the
behavior of others. As a student, you are expected to attend class, listen and take notes, study for
tests, and complete assignments. Because you know what the role of the teacher involves, you
can predict that your teacher will lecture, give exams, and assign grades based on your
performance on tests. 

A single status involves more than one role. For example, the status of prison inmate includes
one role for interacting with prison guards and another role for interacting with other prison
inmates. Similarly, the status of nurse involves different roles for interacting with physicians and
with patients. 

Elements of Culture

Whereas social structure refers to the organization of society, culture refers to the meanings and
ways of life that characterize a society. The elements of culture include beliefs, values, norms,
sanctions, and symbols. 

Beliefs Beliefs refer to definitions and explanations about what is assumed to be true. The belief
of an individual or group influence whether that individual or group views a particular social
condition as a social problem. Does secondhand smoke harm nonsmokers? Are nuclear power
plants safe? Does violence in movies and on television lead to increase aggression in children?
Our beliefs regarding these issues influence whether we view the issues as social problems.
Beliefs not only influence how a social condition is interpreted, they also influence the existence
of the condition itself. For example, men who believe that when a woman says "no," she really
means "yes" or "maybe" are more likely to commit rape and sexual assault than men who do not
have these beliefs (Frank, 1991). 

Values Values are social agreements about what is considered good and bad, right and wrong,
desirable and undesirable. Frequently, social conditions are viewed as social problems when the
conditions are incompatible with or contradict closely held values. For example, poverty and
homelessness violates the value of human welfare; crime contradicts the values of honesty,
private property, and nonviolence; racism, sexism, and heterosexism violate the values of
equality and fairness. 

Norms and Sanctions Norms are socially defined rules of behavior. Norms serve as guidelines
for our behavior and for our expectations of the behavior of others. 

There are three types of norms: folkways, laws, and mores. Folkways refer to the customs and
manners of society. In many segments of our society, it is customary to shake hands when being

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introduced to a new acquaintance, to say "excuse me" after sneezing, and to give presents to
family and friends on their birthdays. Although no laws require us to do these things, we are
expected to do them because they are part of the cultural traditions, or folkways, of the society in
which we live. 

Laws are norms that are formalized and backed by political authority. A person who eats food
out of a public garbage container is violating a folkway; no law prohibits this behavior.
However, throwing trash onto a public street is considered littering and is against the law. 

Some norms, called mores, have a moral basis. Violations of mores may produce shock, horror,
and moral indignation. Both littering and child sexual abuse are violations of law, but child
sexual abuse is also a violation of our mores because we view such behavior as immoral. 

All norms are associated with sanctions, or social consequences for conforming to or violating
norms. When we conform to a social norm, we may be rewarded by a positive sanction. These
may range from an approving smile to a public ceremony in our honor. When we violate a social
norm, we may be punished by a negative sanction, which may range from a disapproving look to
the death penalty or life in prison. Most sanctions are spontaneous expressions of approval or
disapproval by groups and individuals--these are referred to as informal sanctions. Sanctions that
are carried out according to some recognized or formal procedure are referred to as formal
sanctions. Types of sanctions, then, include positive informal sanctions, positive formal
sanctions, negative informal sanctions, and negative formal sanctions . [William Graham
Sumner developed the concept of how norms and sanctions work within society.]

Symbols A symbol is something that represents something else. Without symbols, we could not
communicate with each other or live as social beings.

The symbol of a culture include language, gestures, and objects whose meaning is commonly
understood by the members of society. In our society, a red ribbon tied around a car antenna
symbolizes Mothers Against Drunk Driving, a peace sign symbolizes the value of nonviolence,
and a white hooded robe symbolizes the Ku Klux Klan. Sometimes people attach different
meanings to the same symbol. The Confederate flag is a symbol of Southern pride to some, a
symbol of racial bigotry to others. 

The elements of the social structure and culture just discussed play a central role in the creation,
maintenance, and social response to various social problems. One of the goals of taking a course
in social problems is to develop an awareness of how the elements of social structure and culture
contribute to social problems. Sociologists refer to this awareness as the "sociological
imagination" or "sociological mindfulness."

Social responsibility of business

The social responsibility of business means various obligations or responsibilities or

duties that a business-organization has towards the society within which it exists and operates
from.

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Generally, the social responsibility of business comprises of certain duties towards entities,
which are depicted and listed below.

 social responsibility of business

 Shareholders or investors who contribute funds for business.
 Employees and others that make up its personnel.
 Consumers or customers who consumes and/or uses its outputs (products and/or
services).
 Government and local administrative bodies that regulate its commercial activities in
their jurisdictions.
 Members of a local community who are either directly or indirectly influenced by its
activities in their area.
 Surrounding environment of a location from it operates.
 The general public that makes up a big part of society.

The social responsibility of business comprises of the following obligations:

 A business must give a proper dividend to its shareholders or investors.

 It must provide fair wages and salaries with good working conditions.
 It must provide a regular supply of good quality goods and/or services to its
consumers/customers at reasonable prices.
 It must abide by all government rules and regulations, supports its business-related
policies and should pay fair taxes without keeping any delays or dues.
 It must also contribute in betterment of a local community by doing generous activities
like building schools, colleges, hospitals, etc.
 It must take immense care to see that its activities neither directly nor indirectly create a
havoc on the vitality of its surrounding environment.
 It should maintain a stringent policy to curb or control pollution in regard to
contamination of air, water, land, sound and radiation leakages. Here, to do so, it must
hire experienced professional individuals who are experts in their respective fields.
 It should also offer social-welfare services to the general public.
 The core objectives of social responsibility of business are as follows:
 It is a concept that implies a business must operate (function) with a firm mindset to
protect and promote the interest and welfare of society.
 Profit (earned through any means) must not be its only highest objective else
contributions made for betterment and progress of a society must also be given a prime
importance.
 It must honestly fulfill its social responsibilities in regard to the welfare of society in
which it operates and whose resources & infrastructures it makes use of to earn huge
profits.
 It should never neglect (avoid) its responsibilities towards society in which it flourishes.

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1. Shareholders or investors

Social responsibility of business towards its shareholders or investors is most important

of all other obligations.

If a business satisfies its funders, they are likely to invest more money in a project. As a
result, more funds will flow in and the same can be utilized to modernize, expand and diversify
the existing activities on a larger scale. Happy financiers can fulfill the rising demand of funds
needed for its growth and expansion.

2. Personnel

Social responsibility of business towards its personnel is important because they are the
wheels of an organization. Without their support, the commercial institution simply can't
function or operate.

If a business takes care of the needs of its human resource (for e.g. of office staff, employees,
workers, etc.) wisely, it will boost the motivation and working spirit within an organization. A
happy employee usually gives his best to the organization in terms of quality labor and timely
output than an unsatisfied one. A pleasant working environment helps in improving the
efficiency and productivity of working people. A good remuneration policy attracts new talented
professionals who can further contribute in its growth and expansion. Thus, if personnel is
satisfied, then they will work together very hard and aid in increasing the production, sales and
profit.

3. Consumers or customers

Social responsibility of business towards its consumers or customers matters a lot from
sales and profit point of view. Its success is directly dependents on their level of satisfaction.
Higher their rate of satisfaction greater are the chances to succeed.

If a business rolls out good-quality products and/or delivers better quality services that
too at reasonable prices, then it is natural to attract lots of customers. If the quality-price ratio is
maintained well and consumers get worth for their money spend, this will surely satisfy them. In
a long run, customer loyalty and retention will grow, and this will ultimately lead to profitability.

4. Government

Social responsibility of business towards government's regulatory bodies or agencies is

quite sensitive from the license's point of view. If permission is not granted or revoked abruptly,
it can result in huge losses to an organization. Therefore, compliance in this regard is necessary.

Furthermore, a business must also function within the demarcation of rules and policies
as formulated from time to time by the government of state or nation. It should respect laws and
abide by all established regulations while performing within the jurisdiction of state.

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Some examples of activities a business can do in this regard:

 Licensing an organization,
 Seeking permissions wherever necessary,
 Paying fair taxes on time,
 Following labor, environmental and other laws, etc.

If laws are respected and followed, it creates a goodwill of business in eyes of authorities.
Overall, if a government is satisfied it will make favorable commercial policies, which will
ultimately open new opportunities and finally benefit the organization sooner or later. Therefore,
satisfaction of government and local administrative bodies is equally important for legal
continuation of business.

5. Local community

Social responsibility of business towards the local community of its established area is
significant. This is essential for smooth functioning of its activities without any agitations or
hindrances.

A business has a responsibility towards the local community besides which it is

established and operates from. Industrial activities carried out in a local-area affect the lives of
many people who reside in and around it. So, as a compensation for their hardship, an
organization must do something or other to alleviate the intensity of suffering.

As a service to the local community, a business can build:

 A trust-run hospital or health center for local patients,

 A primary and secondary school for local children,
 A diploma and degree college for local students,
 An employment center for recruiting skilled local people, etc.

Such activities to some-extend may satisfy the people that make local community and hence their
changes of agitations against an establishment are greatly reduced. This will ensure the longevity
of a business in a long run.

6. Environment

Social responsibility of business with respect to its surrounding environment can't be

sidelined at any cost. It must show a keen interest to safeguard and not harm the vitality of the
nature.

A business must take enough care to check that its activities don't create a negative
impact on the environment. For example, dumping of industrial wastes without proper treatment
must be strictly avoided. Guidelines as stipulated in the environmental laws must be sincerely
followed. Lives of all living beings are impacted either positively or negatively depending on
how well their surrounding environment is maintained (naturally or artificially). Humans also are

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no exception to this. In other words, health of an environment influences the health of our
society. Hence, environmental safety must not be an option else a top priority of every business.

7. Public

Finally, social responsibility of business in general can also contribute to make the lives
of people a little better. Some examples of services towards public include:

 Building and maintaining devotional or spiritual places and gardens for people,
 Sponsoring the education of poor meritorious students,
 Organizing events for a social cause, etc.

Such philanthropic actions create a goodwill or fame for the business-organization in the psyche
of general public, which though slowly but ultimately pay off in a due course of time. The world
is recognizing the importance of social responsibility of business.

Basis of social audit

Social audit as a term was used as far back as the 1950s. There has been a flurry of
activity and interest in the last seven to eight years in India and neighboring countries. Voluntary
development organizations are also actively concerned. Social audit is based on the principle that
democratic local governance should be carried out, as far as possible, with the consent and
understanding of all concerned. It is thus a process and not an event.

What is a social audit?

A social audit is a way of measuring, understanding, reporting and ultimately improving

an organization’s social and ethical performance. A social audit helps to narrow gaps between
vision/goal and reality, between efficiency and effectiveness. It is a technique to understand,
measure, verify, report on and to improve the social performance of the organization. Social
auditing creates an impact upon governance. It values the voice of stakeholders, including
marginalized/poor groups whose voices are rarely heard. Social auditing is taken up for the
purpose of enhancing local governance, particularly for strengthening accountability and
transparency in local bodies. The key difference between development and social audit is that a
social audit focuses on the neglected issue of social impacts, while a development audit has a
broader focus including environment and economic issues, such as the efficiency of a project or
programme.
Objectives of social audit
1. Assessing the physical and financial gaps between needs and resources available for local
development.
2. Creating awareness among beneficiaries and providers of local social and productive
services.
3. Increasing efficacy and effectiveness of local development programmes.
4. Scrutiny of various policy decisions, keeping in view stakeholder interests and priorities,
particularly of rural poor.

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 5. Estimation of the opportunity cost for stakeholders of not getting timely access to public
services.

Advantages of social audit

(a) Trains the community on participatory local planning.

(b) Encourages local democracy.
(c) Encourages community participation.
(d) Benefits disadvantaged groups.
(e) Promotes collective decision making and sharing responsibilities.
(f) Develops human resources and social capital

To be effective, the social auditor must have the right to:

1. seek clarifications from the implementing agency about any decision-making, activity,
scheme, income and expenditure incurred by the agency;
2. consider and scrutinize existing schemes and local activities of the agency; and
3. access registers and documents relating to all development activities undertaken by the
implementing agency or by any other government department.
This requires transparency in the decision-making and activities of the implementing agencies. In
a way, social audit includes measures for enhancing transparency by enforcing the right to
information in the planning and implementation of local development activities.

Public documents for social audit

(a) All budget allocations, beneficiary lists, muster rolls, bills, vouchers, accounts, etc. must be
available for public scrutiny.
(b) All applications for licenses/permits and certificates issued by local self-government
institutions must have a serial number. Registers indicating date of application and date of
clearance in each case should be available for reference by any applicant. If possible, copies should
be publicly displayed.
(c) Public assessment of tax, exemptions, grants, etc., to ensure there are no complaints of undue
preferential treatment.
Several states have declared all Gram Panchayat plan documents related to beneficiary selection,
budget cost estimates, etc. to be public documents. A daily notice to be posted at the site of all
development works, lists names of workers, wages paid, cost and quantities of material, transport
charges, etc. However, social audit arrangements have mostly been ineffective because there is no
legal provision for punitive action. States should enact legislation to facilitate social audit by
the Gram Sabha.

Appropriate institutional level for social audit

The most appropriate institutional level for social audit is the Gram Sabha, which has been
given ‘watchdog’ powers and responsibilities by the Panchayati Raj Acts in most States to
supervise and monitor the functioning of panchayat elected representatives and government
functionaries, and examine the annual statement of accounts and audit reports. These are implied
powers indirectly empowering Gram Sabhas to carry out social audits in addition to other
functions. Members of theGram Sabha and the village panchayat, intermediate panchayat and

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district panchayat through their representatives, can raise issues of social concern and public
interest and demand an explanation.

Right to information for members of Gram Sabha

Some States have already passed Right to Information Acts. Notwithstanding some weaknesses,
the Acts have opened the way for transparency in administration from the State to
the panchayat level.
The Right to Information Acts specify the modalities for obtaining information and provide
penalties or failing to furnish or supplying false information. The Acts facilitate social legislation
such as on minimum wages and gender rights and, more importantly, pave the way for public
debate on government development projects.
However, none of the Acts have defined the right to information to include inspection of works and
documents, and the taking of notes and extracts. This is needed to make the social audit by
the Gram Sabha more effective.

The Gram Sabha should have the mandate to: inspect all public documents related to budget
allocations, list of beneficiaries, assistance under each scheme, muster rolls, bills, vouchers,
accounts, etc., for scrutiny; examine annual statements of accounts and audit reports; discuss the
report on the local administration of the preceding year; review local development for the year or
any new activity programme; establish accountability of functionaries found guilty of violating
established norms/rules; suggest measures for promoting transparency in identifying, planning,
implementing, monitoring and evaluating relevant local development programmes; and ensure
opportunity for rural poor to voice their concerns while participating in social audit meetings.

Social audit committees

Social audit can also be used for auditing the performance of all three PRI tiers with a
social audit committee at each level. These committees should not be permanent, but can be set
up depending on the nature of programmes/schemes to be audited.
Social audit committee members can be drawn from among programme stakeholders. It is
advisable to use the services of retired functionaries of different organizations, teachers or
persons of impeccable integrity living in the Zilla Panchayat/Block Panchayat/Gram
Panchayat jurisdiction. Both facilitators and social audit committee members can be trained by
social audit experts.

Steps in social audit in local bodies

1. Clarity of purpose and goal of the local elected body.
2. Identify stakeholders with a focus on their specific roles and duties. Social auditing aims
to ensure a say for all stakeholders. It is particularly important that marginalized social
groups, which are normally excluded, have a say on local development issues and
activities and have their views on the actual performance of local elected bodies.
3. Definition of performance indicators which must be understood and accepted by all.
Indicator data must be collected by stakeholders on a regular basis.
4. Regular meetings to review and discuss data/information on performance indicators.
5. Follow-up of social audit meeting with the panchayat body reviewing stakeholders’
actions, activities and viewpoints, making commitments on changes and agreeing on
future action as recommended by the stakeholders.

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 6. Establishment of a group of trusted local people including elderly people, teachers and
others who are committed and independent, to be involved in the verification and to
judge if the decisions based upon social audit have been implemented.
7. The findings of the social audit should be shared with all local stakeholders. This
encourages transparency and accountability. A report of the social audit meeting should
be distributed for Gram Panchayat auditing. In addition, key decisions should be written
on walls and boards and communicated orally.

Key factors for successful social audit

 Level of information shared with and involvement of stakeholders, particularly of the
rural poor, women, and other marginalized sections.
 Commitment, seriousness and clear responsibilities for follow-up actions by elected
members of the Gram Panchayat.
 Involvement of key facilitators in the process.

How to enhance local capacities for social audit

 Organization of a mass campaign to increase public awareness about the meaning, scope,
purpose and objectives of social audit.
 Establishment of a team of social audit experts in each district who are responsible for
training social audit committee members (stakeholders).
 Implementation of training programmes on social auditing methods - conducting and
preparing social audit reports, and presentation at Gram Sabha meetings.

Social development monitoring (SDM): a social audit process

SDM is a periodic observation activity by socially disadvantaged groups as local citizens
who are project participants or target beneficiaries. It could also take the form of action intended
to enhance participation, ensure inclusiveness, articulation of accountability, responsiveness and
transparency by implementing agencies or local institutions, with a declared purpose of making
an impact on their socio-economic status.

Conclusion
To sum up, the following proposals can be made to make social audit a regular and effective
institution to promote the culture of transparency and accountability through the Gram Sabha.
1. States should enhance Gram Sabha powers to make them effective instruments of
participatory decision-making and ensuring accountability of PRIs in local development
planning.
2. An agency like the Ombudsman can be set up to look into complaints of local
maladministration.
3. Development functionaries found guilty of violating established norms for local
development planning should be punished.
4. It is important to ensure that rural poor are given due protection when they wish to stand
up to speak against any misconduct.

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