Creativebias Helpsheet: Social Accounting for Social Enterprises

Social Accounting for Social Enterprises

A Guide for Creative Industries Entrepreneurs

What is Social Accounting?

Undertaking social accounting is the process of researching and writing a report detailing the achievements and developments of your business during the last year, together with details of feedback from your stakeholders and partners. The report is verified by an external board and then presented and distributed. This could be as a physical and/or online report.

Social enterprises are increasingly expected to be accountable for their social and environmental policies, so the report should also include sections on the environmental and financial impact your enterprise has on the local community.

The process of social accounting is undertaken by many social enterprises, community enterprises and voluntary organisations. Well-known organisations that publish annual social accounts include The Body Shop, Traidcraft and Ikea.

Social accounting on a smaller scale is appropriate for a creative industries social enterprise. Your enterprise must have been trading for a year or more and be of a size in terms of sales and workforce when you have a number of stakeholders and business partners. If your business hasn't been trading for a year, you can use this help sheet to plan how you will undertake your social accounts in the future and put systems in place now to make the process easier.

Social accounting involves learning not only about the effect your social enterprise has on the society around you, but also examines your relationships with your stakeholders. Stakeholders are the people and groups who affect and/or are affected by the business and its activities.

The process is a way of measuring, communicating and improving the performance of your business; however it is different from traditional evaluation in that it focuses on your specific businesses objectives, rather than being determined by other people's criteria. You can choose to focus on the areas that you deem most important and relevant to your business and its stakeholders.

For example: If one of the main objectives of your enterprise is to help disabled members of your local community perform music and drama you will be judged on how well you have achieved this particular aim, rather than being judged simply on your financial performance.

Why should my social enterprise undertake social accounting?

There are three main reasons to undertake social accounting:

• Accountability to stakeholders and funders
  

It is likely that as a social enterprise, you have received subsidies or funding from a local or national business support programme. You are therefore accountable to these funders in addition to your other stakeholders.

The report provides these stakeholders and funders with proof that you are achieving your objectives and using the funding effectively and fairly.

By being wide ranging in its subject matter and reporting in detail on each area of your business, the report will allow each stakeholder to make their own judgements and enables the differing priorities of individual stakeholders to be addressed.

• Improve your services and ways of operation
  

The gathering and subsequent analysis of feedback should help you decide whether you are meeting your original aims and encourage development of any parts of your service that have been deemed in need of improvement. Having to collate all the feedback you have collected over the year should also show which areas of your self-evaluation process need development.

Also, by gathering feedback on your performance you can learn how your social enterprise is seen by businesses and stakeholders from various backgrounds.

Feedback and suggestions from stakeholders and clients can feed directly into the ways you manage your enterprise and deal with stakeholders in the future. The process offers the opportunity for the business to systematically review its general strengths and weakness and designate areas for improvement.

Having a verified and comprehensive statement of the organisation's impact and performance can help in reporting to funders/investors, reporting to stakeholders and in compiling annual reports.

• Puts structures in place for evaluation
  

Social accounting establishes a framework for ongoing monitoring, evaluation and accountability to stakeholders both internal and external to the organisation. It will also help you to set up a system to regularly measure social performance, and should help you find the reasons for any difference between targets and actual performance.

You can also see social accounting as a form of marketing. Not only does it display to people how their support helps your business grow and develop but it can attract new customers and partners by showing people what service you offer and how you deliver it. It can be used as another method of advertising, particularly to other businesses and members of funding bodies.

"Undertaking social accounting meant that we kept focused on our aims, as well as opening up new channels of communication with our stakeholders. By talking candidly to our clients, staff, partners and stakeholders, we discovered ways we could improve our service. "

Lisa McMullen - Train 2000

How do I research the report?

The practical process of undertaking social accounting for a creative industries social enterprise can be split into 5 steps:

1. Take Stock

As part of the planning process you need to decide:

• Why is the process being undertaken?
• How long will the process take?
• How much will it cost?
• Which member/s of staff should manage the process?
  

You should work out whether you or one of your staff have the skills and time to research the report yourself. Social accounting can only be undertaken by businesses with a certain amount of staff and stakeholders, as it can be an expensive and time-consuming process.

Staff time is required throughout the social accounting cycle. Generally more time is needed to set up the process at the beginning than to compile, analyse and write up the information at the end.

If you are a small social enterprise and don't have many staff or stakeholders, you can undertake a smaller scale accounting exercise:

For example: set aside a two week period for social accounting and spend one week gathering feedback and one week writing the report.

In this first stage of research you should ask yourself what your business already does towards monitoring, evaluation and record keeping. You may already have relevant procedures and policies in place to record stakeholder feedback and comments. If you do, you should identify what existing records and data can be used as this will save you time and resources when you come to gather feedback from current stakeholders. You should then begin to decide what new, additional data needs to be collected and how.

2. Clarify the social objectives of your organisation and the activities undertaken to achieve them

You should clarify the mission, values and objectives of your business and list, in practical terms, what steps you take to achieve your objectives. This section needs to be as accurate and comprehensive as possible as it will form the basis of your feedback questionnaires and surveys.

3. Map the stakeholders

You need to identify the key stakeholders in your social enterprise, as this will help you clarify what you are trying to achieve and for whom.

It may help to create a stakeholder map. A stakeholder map can be a simple diagram listing all the people and businesses that are affected by your social enterprise and details of their relationship with you e.g. funder, client, business partner, how often you contact them and what their main priorities are.

This should show you which stakeholders you need to engage with more and which ones are most important to your business.

4. Determine the scope, subjects and methodology of your research

Once you have clarified your objectives and planned which issues need to be addressed to satisfy your stakeholders, it should be easier to determine the scope of the social audit and agree the indicators which will allow your performance to be assessed.

It may be useful to prepare detailed spreadsheets or matrices of your stakeholders detailing:

• Who to contact,
• When and how you are going to contact them,
• What you would like to know from them,
• Which issues should be discussed and
• What questions should be asked.

You should create stakeholder and staff surveys and questionnaires. Your questions should be focused on gathering opinions and ratings. Opinions can be used as quotes and ratings can be turned into graphical data, making easily digestible results for your report.

Identifying quantitative and qualitative indicators against each of your objectives will help you illustrate your achievements simply and clearly and make the questioning process more efficient.

For example: ask people how they rate your fulfillment of each of your objectives from 1 - 6, 1 being very poor, 6 being excellent (don't opt for a scale of 1-3 or 1-5 here, it's too easy for participants to choose the middle point without giving it serious consideration); and then split a results table into Staff, Board of Directors and Stakeholders/Partners showing their feedback.

As well as gathering results on your performance you should also gather some personal information on your stakeholders for inclusion in your report. Find out their ethnic origin, postcode, disabled status, marital status, children etc. as some of your funding and status as a social enterprise may depend on you helping people from a certain area or background.

You need to decide how you are going to interview your stakeholders. Phone interviews are quick and efficient but you may be able to get less detailed answers from people as you are likely to be taking time out of their working day. A postal survey may yield more detailed results, but you are likely to get significantly fewer responses than a phone survey. If you do phone interviews, create a questionnaire template and fill it in for each person you interview.

Your survey does not have to ask linear questions such as "how many products have you sold since you dealt with our social enterprise?"

It can involve more abstract questioning such as "is your business now more confident and prosperous since dealing with our social enterprise?"

5. Collect your data and begin to write your report

Finally, produce a plan and time-table detailing deadlines for when parts of the project must be complete and who is responsible for the work and begin writing your report.

"Integrating the collection of feedback into our everyday activities made gathering information for the accounts a lot simpler and less disruptive to our daily schedule. Getting feedback doesn't always have to be complicated; it can be as simple as talking to people and asking them questions."

Lisa McMullen - Train 2000

How should your report be presented?

The tone and presentation of the report should represent the image that you want for your enterprise. Make the report lively with lots of photographs and colour and ensure that it is clearly written and easy to read. Remember that the report may be people's first impression of your business so any errors will reflect badly on your enterprise.

Your accounts should be structured clearly and concisely:

• Welcome and introduction - Explain what the report is about and highlight some of your main achievements from the year in question. Include any news of awards you may have received, articles in the press, or anything of note. This section should include a copy of your external verification certificate from your panel and a contents table. You should only include abbreviated thanks to people who have supported you, as there should be a more detailed list at the end of the document.
• The history of your social enterprise - When were you established? What legal form did you take? How many people do you employ? What do they do? What is your management structure? What is your approximate annual turnover?
• Why have you undertaken social accounting? - Is this the first time your business has undertaken social accounting? What made you do it? How is it beneficial to you and your stakeholders? What are you hoping to achieve by researching and writing social accounts?
• An analysis section split into:
  

1. Mission - Include your mission statement here and if it has been updated include any revisions and the reasons for them.

2. Values - Your values are the core moral code which your business operates. You should define them and explain how they affect the day to day running of your business here.

3. Objectives and activities - This should be an initial summary of the practical objectives that you developed in the planning stage of the business and some details of how you have achieved them. This is a precursor for a more detailed run through later on in the report and therefore shouldn't be too long.

4. Your services - Which organisations have you done work for? What has the work involved? Include specific examples of your work and exactly how you have operated. How did you identify a need or market for your services? How do you get new work?

5. Stakeholders - What sort of client base do you serve? This section should detail which sectors your stakeholders come from e.g. public sector, private sector, educational bodies, funders etc and how you prioritised them in your stakeholder map. What is the background of your clients? Who do you aim to help the most?

6. A client profile - You could include a profile of some of your clients, in which they highlight how your social enterprise has helped them and what your strengths are as a business.

7. Methodology - How did you undertake the social accounts report? Explain the research process, how did you collect your results and data and then convert them into graphical charts?

• Performance Analysis

This should be the largest section within your report and should begin with an abbreviated version of your mission. This should be followed by your values and detail how well your stakeholders think you have stuck to them.

The final section should list your objectives with more details of how you have achieved them, followed by quotes from stakeholders and figures from your survey and questionnaires to back up your claims.

You should have individual sections for each objective which could be laid out as such:

1. Objective 1 - Give a detailed explanation of the objective.

2. We achieve this objective by: List the actions you take to achieve the objective.

3. Stakeholder reaction: How do your stakeholders think you have performed in this particular area? This section should feature results from your surveys and questionnaires presented in accessible tables, graphs and charts and should also include quotes from your stakeholders, staff, directors and partners.

4. Extra points: Are there any changes you have made to achieve this objective this year that you wish to highlight, or any particular successes in achieving this objective?

5. Conclusion: What have you discovered about how successfully you achieve your objectives? And what you will do in the future to improve?

• Environmental Impact and Sustainability

Do you have an environmental policy to minimise waste and reduce energy consumption? Do you recycle your paper or ink cartridges? Are you aware of ways you could become more environmentally friendly? - How much of your income do you spend within the local economy? Have you helped any other local businesses make money? Have you employed anyone? Note here any ways in which you hope to help sustain the local or national economy further in the future.

• Conclusion and recommendations including future plans

In this section you should summarise all your future plans and the conclusions that you have obtained from each individual section of your social accounting exercise. The conclusion could summarise your business's aspirations and how you will develop a more socially responsible strategy, and/or describe how you plan to increase and improve stakeholder dialogue.

• Thanks

A more detailed list of people who have helped you or worked with you over the past year and have been involved in the social accounting process. You may also want to publish the questionnaires you issued as an appendix at the end of the report.

Format

Depending on the size of your business and how much time you are dedicating to the process you could produce two versions of your social accounting report:

1. A fully comprehensive social accounts report: A4 size, lots of photographs and visual data, including all findings and results from your research.

2. An abridged version: Booklet size, less information, just the key findings

The larger version will be your primary social accounts report and be sent to all major stakeholders and funders. The smaller version could be for people to dip into to learn about your social enterprise. Not everyone will have the time to read the full report. The abridged version can still convey all the points you want to about your business but in a "bitesize" manner which may be less intimidating for casual readers.

"Remember that your social accounts reflect your business and its achievements. Present the information in a positive and enthusiastic manner and make sure the accounts are informative and interesting to read. Try not to waffle, and make points clearly and concisely. "

Frank Titley - Social Enterprises Consultant, Blue Orchid.

Once you have completed a first draft of your report you need to present it to your social accounting panel for verification.

What is a social accounting panel?

You need a panel of people external to your enterprise with a background and experience in business to check through and verify your findings, as a form of independent adjudicator. The panel will highlight any major oversights or mistakes in your accounts and should examine a sample of the data you present in the report and also verify the sources for some of your information and quotes

The panel's main task is to check that you have presented a fair and balanced view of your business's performance for the year in question, but they should also recommend which areas of your report should be developed and expanded in your next annual summary.

There should be 2-3 people on your panel; you should try and get experienced people from different areas of business who are familiar with how creative social enterprises operate, maybe a member of a funding body or a director of another social enterprise

The Social Auditing Network can provide a list of accredited panelists in your area and can give tips and advice on setting up your panel, www.socialauditnetwork.org.uk.

You should submit draft accounts to the panel and they should discuss them with you so you can make revisions before the full accounts are published.

When they are satisfied with your report the panel should present you with an external verification certificate, detailing their findings and signed by all members of the panel.

What are the risks involved in social accounting?

Social accounting can take a lot of time and work, especially the first time. If your social enterprise has not had a structure in place to gather feedback and map stakeholders from the start, it can be difficult to progress through the process rapidly.

Although engaging in a social accounting process can be seen as a commitment to improvement, social accounting is not always recognised by funders as the questions asked and methods for finding the answers are left to each individual business to decide.

"Be careful not to underestimate how long social accounting will take you. It needs to be planned and carried out efficiently; it is hard work but can have substantial impact on the development and growth of your enterprise. "

Lisa McMullen - Train 2000

Links:

• Social Enterprise Network
• Social Audit Network
• Social Accountability Organisation
• Business Link page on social responsibility (search for 'social accounts')
• Links for social accounting from London Business School

NB The word stakeholder has evolved to mean a person or organisation that has a legitimate interest in a project or entity. In discussing the decision-making process for institutions the concept has been broadened to include everyone with an interest or stake, in what the enterprise does.

In terms of a social enterprise a stakeholder is anyone who has a financial or commercial interest in the business. It could be the management, employees, or a client. It could also include business support agencies or funders who have helped you start your enterprise such as the Local Education Authority or the MDA and Creativebias.