Corporate responsibility audits: Doing well by going good

Responsibility audits are a management tool for demonstrating the potential qualitative and financial benefits of mirroring core values and ethics in day-to-day practice. Waddock and Smith argue that corporate financial perfo rmance and socially responsible practices are positively correlated. They o utline a responsibility auditing process that improves both the bottom line and a firm's stakeholder relationships with owners, employees, suppliers, customers, local communities, and government entities. Companies typically overlook the hidden costs of problematic or less respon sible practices. The authors cite examples of how operating responsible oft en saves money (in overhead, employee turnover rates, insurance costs, and other non-value-added expenses) and may even create profitable new opportun ities. . Eight companies beta tested the authors' responsibility audit by comparing their operating practices with their formally stated vision, values, and mi ssion. All uncovered deficiencies in four operating areas: employee relatio ns, quality systems, community relations, and environmental practices. The audit process consistently revealed that when a company adopted proactive, responsible practices, it reaped measurable improvements in efficiency and productivity, lowered legal exposure and risks to the company's reputation, and reduced direct and overhead costs. By creating an adaptive and proacti ve corporate culture from the top down, operating responsibly becomes a cor e business strategy.