The Body Shop approach to stakeholder auditing
A Body Shop case study

Page 4: Shareholders

The Body Shop is a Public Limited Company and its shareholders are the legal owners. Individuals and institutions buy shares in order to make a return on their investment. Although shareholders may recognise the importance of social and environmental issues, the share price remains important. A falling share price can wipe millions of pounds off the value of a company. In theory, if the shareholders are dissatisfied with the performance of the company, they can remove the Board of Directors at the Annual General Meeting.

Although a firm has many objectives, it is part of a local community and therefore, has a responsibility to the community in which it operates and the local economy. In Littlehampton, for example, a town with unemployment above the national average, The Body Shop is the second largest employer. Job creation is therefore very important to the town. The Body Shop also allows its employees paid time off to do volunteer work in their local community.

The Body Shop is committed to best practice in environmental management and is against animal testing on cosmetics and toiletries. All groups involved in these issues will be interested to see how The Body Shop performs. Their objectives may be different from other stakeholder groups and their measures of success may conflict.

Methodology

The word ‘audit’ may conjure up images of finance and accountancy, but an audit is simply a method of checking a firm's progress. How successful has it been compared to its stated objectives? With so many different interested groups, with contrasting aims and objectives, this is not as straightforward as it may appear. As with a financial audit, the first step is to find a suitable, credible independent organisation to verify the audit with its social audience. The Body Shop worked closely with the New Economics Foundation, a UK based think-tank, to design and tailor the audit methodology to The Body Shop.

The over-riding challenge of stakeholder, or social, auditing is finding a way to measure how people think. Some objectives, targets and performances are reasonably easy to quantify; if, for example, the local community’s objective is to reduce regional unemployment, then new jobs created can be measured. Shareholders’ dividends, employees’ wages or customer complaints are quantifiable, but for many of the objectives, it is impossible to apply tangible measures such as numbers and statistics to intangible human thoughts and emotions. It is also important not to let the voice of one stakeholder drown others. Minority views need to be recognised and therefore the external verifier must ensure that the correct balance is struck. The Body Shop took a year to research, develop and formalise its social auditing procedures and since its adoption in 1994, a great deal of fine tuning has occurred.

The audit involves a mix of focus groups, market research-style questionnaires, face-to-face interviews and data collection. The information is collected from each of the stakeholder groups - in all, more than 5,000 people were consulted in the 1995 audit. As with any kind of audit, the true value can only be measured by what follows, so feedback processes and future action plans are critically important. The overriding objective of a stakeholder audit must be to make The Body Shop more efficient, more accountable and more effective. Therefore, the organisation must be completely open and honest and be prepared to acknowledge its failures as well as its successes. External, independent verification is also important if the report is to be a useful policy tool and not merely a marketing ploy.


Body Shop | The Body Shop approach to stakeholder auditing

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