The Body Shop Values
Report – Towards Integrated
Stakeholder Auditing
ABSTRACT. All the available evidence suggests that
companies which are run with a view to the long
term interests of their key stakeholders are more likely
to prosper than those which take a short term, “share-
holder first” approach (Wheeler and Sillanpää, 1997).
Indeed it is the central premise of this article that
forces of economic globalisation and developments
in the technology of mass communication will make
stakeholder inclusion an increasingly essential com-
ponent of corporate strategy in the 21st century. Put
simply, companies, like governments and other estab-
lished institutions, need to listen, to process and to
respond positively to the values and beliefs of their
stakeholders – most especially their customers,
employees and investors. Failure to do this will reduce
competitiveness and increase the risk of corporate
demise.
The business case for stakeholder inclusion
The effective management of business issues such
as product quality, learning (knowledge transfer)
and human resource management, may be
achieved in one of two ways. They may be done
top down, based on the development of detailed
process prescriptions and individual job specifi-
cations and accomplished within a “command
and control” framework. Alternatively they may
Maria Sillanpää (M.Sc.) is Ethical Audit Team Manager
at The Body Shop International plc and Industrial
Research Fellow at Kingston University, Centre of
Stakeholding and Sustainable Enterprise. Her current
doctoral research explores the concepts of learning organ-
isations, complexity and dialogue-driven approaches to
corporate social responsibility. She is a council member
of the Institute of Social and Ethical Accountability and
sits on the board of the U.K. government-sponsored
Ethical Trading Initiative.
Journal of Business Ethics 17: 1443–1456, 1998.
© 1998 Kluwer Academic Publishers. Printed in the Netherlands.
Maria Sillanpää
be managed in a spirit of continuous improve-
ment, where all participants may challenge rules
and norms, learn from failure and invent new
ways of working. The Japanese refer to this as
Kaizen. In the most successful companies, a
culture of creative, continuous improvement does
not abolish the need for control systems, corpo-
rate policies and manuals; but absolute reliance is
no longer placed on them.
The first approach draws on Taylor’s Principles
of Scientific Management which were based on
a belief that, in the newly mechanised industries
of the early 20th century, efficiency flowed from
precision in job design, clear division of respon-
sibilities and tight policing of implementation
(Taylor, 1911). Taylorism (and its industrial
apotheosis Fordism) was wholly consistent with
notions of the organisation as a “military
machine” first developed by Frederick the Great
of Prussia, and later refined by Henri Fayol
(1949). Taylorism also embraced theories of
division of labour first expounded by Adam
Smith in the context of his mythical pin factory.
In each case the customer is simply a consumer
and the employee a cog in an industrial machine.
During the early twentieth century, the results
of implementing the Taylor model were
profound. Mechanisation and top down control
of output and quality led to massive increases in
productivity in certain industries, but the human
cost was significant. At one point Henry Ford’s
assembly lines had an annual employee turnover
of 380 per cent.
The second approach draws on the more
sensitive management theories first pioneered by
Elton Mayo. His now famous Hawthorne Studies
demonstrated the importance of informal work
relationships and manager-employee communi-
1444 Maria Sillanpää
cations (Mayo, 1933). Mayo’s work was rein-
forced after the second world war by researchers
such as Abraham Maslow, Frederick Herzberg
and Douglas McGregor, all of whom explored
human relations at work: how to cater for basic
human needs whilst providing for motivation
through personal development and recognition
(Crainer, 1996).
Later, the concept of continuous improvement
in product quality demonstrated the need for
employee empowerment and involvement in
problem solving – a development based on the
work of American academic W. Edwards Deming
but turned to most powerful effect by com-
panies in the Far East (Oakland, 1996).
Finally, through a coincidence of human
resource development thinking and quality
management thinking, we arrived at the 1990s
concept of the learning or “knowledge creating”
organisation (Senge, 1990; Nonaka and Takeuchi,
1995). In this model, everyone in the firm is a
problem solver and an enhancer of systems.
Everyone is a potential creative force to be
developed and nurtured, and the firm is a more
fluid entity allowing for personal growth to be
combined with organisational effectiveness and
competitive success. Most importantly, the firm
itself should be focused on a wide range of
stakeholder interests and needs.
It is common to quote far eastern high
technology companies as leading exponents of
quality management and organisational learning.
Indeed it was electronics magnate Konosuke
Matsushita who famously challenged the Western
industrial model of organisation thus: “We are
going to win and the industrial West is going to
lose out; there’s not much you can do about it
because the reasons for your failure are within
yourselves. Your firms are built on the Taylor
model, and even worse, so are your heads. With
your bosses doing the thinking while the workers
wield screwdrivers, you’re convinced deep down
that this is the right way to run a business. For
you the essence of management is getting ideas
out of the heads of the managers and into the
hands of labour. We have gone beyond the Taylor
model. We realise that business has become so
complex, the survival of firms so precarious, and
our environment increasingly unpredictable,
competitive and dangerous, that firms’ contin-
uing existence depends on their day to day
mobilisation of every ounce of intelligence”
(Canon, 1996).
Today, eleven out of the world’s top 20 indus-
trial firms are Japanese and they have an enviable
reputation for product quality, customer satisfac-
tion and employee loyalty. But caring about
customers and workers as well as investors is not
only a far-eastern phenomenon. The modern co-
operative movement was, after all, a British
invention (Rochdale, Lancashire circa 1844). And
stakeholder-friendly British firms like Rowntree,
Cadbury, Whitbread and Pilkington thrived in
the middle years of the industrial era (Canon,
1992).
Established U.S. firms like IBM may have had
their ups and downs, but they pioneered novel
and effective systems of employee and manage-
ment development. Drucker described Thomas
Watson’s IBM of the 1930s as creating “the social
organisation and the work community of the post
industrial society”. In their best selling book Built
to Last (Collins and Porras, 1995), Collins and
Porras tracked the commercial performance and
organisational resilience of 18 “visionary” com-
panies nearly all of whom were U.S.-based. They
found that not only did these companies invest
heavily in employee training, knowledge transfer
and alignment of organisational values, they also
outperformed the stock market by an average of
15 times.
In a study conducted by Kotter and Heskett,
it was found that over an eleven year period,
large established U.S. companies which gave
equal priority to employees, customers and share-
holders delivered sales growth four times and
employment growth eight times that of “share-
holder first” companies (Wheeler and Sillanpää,
1997).
Yet stakeholder-exclusive behaviour, although
terribly damaging for the individuals, companies
and communities decimated by the corporate
restructuring of the 1980s, persists. It represents
a flirtation with short termist “shareholder first”
fundamentalism which totally ignored the
experience of successful stakeholder inclusive
enterprise over the last two hundred years.
 The Body Shop International
Two basic principles of stakeholder
inclusion
If stakeholder inclusion is to become the norm
in business, how may successful stakeholder-
inclusive experience be captured and systema-
tised? Wheeler and Sillanpää suggest that two
basic principles of stakeholder inclusion are
common to many successful mainstream corpo-
rations in North America, Europe and Japan (e.g.
IBM, Hewlett-Packard Motorola, S. C. Johnson,
BT, Daimler-Benz, Matsushita and Sony). These
principles have been successfully applied over
many years but not necessarily in an overt way.
At their heart is a commitment to listen and
respond to stakeholder needs and beliefs.
Alignment of values
The literature on quality management is littered
with examples of companies which have rescued
themselves from mediocrity by establishing a
reputation for product quality (e.g. Oakland,
1996). Japanese electronics, automobile and
motorcycle companies adopted a single minded
approach to quality in the 1950s and 1960s which
turned a post-war international reputation for
cheap, poor quality goods to one of unparalleled
reliability and performance by the 1970s.
Japanese companies with a quality focus have
engineered a seamless alignment of product
quality from the suppliers of components,
through the firm and its employees, through
distributors to the customers. Today, no one is in
any doubt what a product from Honda or Sony
represents.
Similar value chain alignment has been
achieved in the retail sector where exceptional
service is twinned with guarantees on product
quality. Wal-Mart (U.S.) and Tesco (U.K.) are
exemplars of this approach, out-performing com-
panies which have concentrated more tradition-
ally on product value for money.
The point here is that perceived “value” may
go well beyond physical and technical notions
of product or service quality. Other, less tangible
values can be offered for customers, employees,
suppliers and investors to unite around. For the
1445
Co-operative Bank and Levi Strauss social
responsibility forms part of the equation for
stakeholders. For The Body Shop and Ben &
Jerry’s Homemade, public political campaigns on
environmental, animal welfare and human rights
provide a unifying force.
In summary, aligning values requires two active
commitments: i) a commitment to share per-
spectives and beliefs via dialogue and effective
communication; and ii) a willingness to allow
collective values to develop and evolve – again
via active dialogue. Values which are articulated
top-down or which are cast in tablets of stone
are by definition non-inclusive and will inevitably
become ossified.
Dialogue-based empowered relationships
In recent years there has been a deluge of man-
agement literature and handbooks explaining
how to deal with the accelerating pace of change
of business (Cannon, 1996; White, Hodgson and
Crainer, 1996; Peters, 1992). The forced flat-
tening of organisational structures in the 1980s
has required a new type of leader and senior
manager to emerge – people who can deal with
chaos. The rapidly globalising economy only adds
to the complexity and uncertainty (Bryan and
Farrell, 1996).
One way to make sense of chaos is to base
decisions on the maximum amount of available
information. The only sure way to secure infor-
mation is to actively request it. In the case of
key relationships with stakeholders this means
regular conversations, focus groups and opinion
surveys. It also means that the firm must organise
itself to be receptive to inputs of opinion. In this
context there are few more important sources of
knowledge and advice than the company’s own
employees.
Table I sets out some trends in organisational
behaviour which may be observed in modern
businesses. The trends are being driven largely by
macro-economic and technological factors. The
best companies are responding and embracing
both the forces and the organisational behaviours
needed to harness them. Nearly all are predicated
on inclusive, dialogue-based interactions between

1446 Maria Sillanpää
Trends in organisational behaviour
Employer directed companies
Organisational goals emerge from leadership
Authority derives from position
Influence increases with seniority
Organisational structure dictates work
relationships
Work systems linear and technical
Style formal or uniform
Responsibility devolved vertically
Corporate objectives agreed by leadership
and cascaded
Reproduced from The Stakeholder Corporation, Pitman.
Source: Wheeler and Sillanpää, 1997.
the firm, its managers and its (empowered)
employees.
As a result of a study of 580 U.K. companies,
the Industrial Society concluded: “It is becoming
a competitive disadvantage not to be moving
significantly towards empowerment, although
there will always be organisations that manage
to survive with the ‘command and control’
approach. But you can only empower people
when everyone shares a very strong vision of
what the organisation needs to be like. That
usually means you have to be explicit about the
organisation’s values” (Industrial Society, 1995).
A dialogue-driven approach is needed to
nurture empowered stakeholder relationships.
The good news is that stakeholder dialogue can
be systematised using relatively simple techniques
of information capture and communication.
Moreover, it is possible to link processes of stake-
holder dialogue and inclusion with management
systems designed to secure continuous improve-
ment in product quality, human resource and
safety management as well as individual learning
and development.
The rest of the article focuses on The Body
TABLE I
Usual Employee inclusive companies

Trend
 Organisational goals are articulated through
language of shared values and vision
 Authority derives from behaviour and intellect
 Influence increases with knowledge
 Organisational structure liberates and encourages
team working
 Work systems cyclical and organic
 Style informal or diverse
 Responsibility shared laterally
 Corporate, team and individual objectives aligned
through dialogue
Shop’s experience in developing and imple-
menting a social audit methodology, aimed at
ensuring continuous improvement in the
company’s stakeholder relations as well as
ensuring greater external accountability and
transparency for its social performance and wider
societal impacts.
The Body Shop approach to social auditing
The methodology development work for The
Body Shop social audit first commenced in 1993
and was formalised for the first audit cycle of
1994/95. The aim was to synthesise some aspects
of environmental management and auditing,
quality management and the long tradition of
academic and practical work in social auditing.
The commitment to social auditing followed
successful experience in implementing audit
programmes for environmental protection and
health and safety at work, as well as ingredient
monitoring programmes for animal protection.
In the case of environmental audits, The Body
Shop elected in 1991 to follow the European
 The Body Shop International 1447

Union Eco-management and Audit Regulation indicators, stakeholder consultation, internal

(EMAS) as the most rigorous framework avail-
able (Wheeler, 1992). Since 1992, the company
has published five independently verified envi-
ronmental statements (The Body Shop Inter-
national, 1992, 1993, 1994, 1996, 1998).
In January 1996, The Body Shop published its
first integrated document of its ethical perfor-
mance called The Values Report 1995. The
report comprised of three statements on the
company’s performance on environmental,
animal protection and social issues. Each state-
ment had an element of independent verification
in line with established best practice. The pub-
lication also included a paper “The Body Shop
Approach to Ethical Auditing” describing the
methods underpinning the three reports. In
January 1998, the company published its second
integrated Values Report.
However, since the focus of this paper is on
the Social Statement, the framework presented
below outlines the different components of the
social audit methodology as implemented by The
Body Shop. The audit cycle consists of ten key
components, namely: policy review, determina-
tion of audit scope, agreement of performance
Leadership and commitment
management systems audit, preparation of
accounts, agreement of strategic and local targets,
verification, publication of statement and internal
reports, and follow-up dialogue with stake-
holders.
The following describes each step briefly in
general terms and provides examples on how
these steps relate to the company’s first two audit
cycles of 1994/95 and 1995/97.
Commitment and leadership
The Body Shop committed itself to a formal
social audit process in 1993. This followed pub-
lication of Anita Roddick’s autobiography in
1991 in which she wrote: “I would love it if
every shareholder of every company wrote a
letter every time they received a company’s
annual report and accounts. I would like them to
say something like, ‘OK, that’s fine, very good.
But where are the details of our environmental
audit? Where are the details of your accounting
to the community? Where is your social audit?’ ”
(Roddick, 1991)

Review or adoption of policy

Publication of statement and Determination of

follow-up dialogue with scope of audit
stakeholders

External verification Agreement of

and certification indicators

Stakeholder
Agreement of objectives consultation

Preparation of accounts
and internal reports Stakeholder surveys

Internal audit

Figure 1. Framework for social auditing and disclosure at The Body Shop.
1448 Maria Sillanpää
There is no doubt that had it not been for the
commitment of the founders of the company and
the development of an “accountability ethos”
within The Body Shop in the early 1990s, the
company would not have been in a position to
publish a statement of its social performance in
1996. As with environmental management and
auditing, clear leadership is probably the most
important single factor in driving a process of
social auditing and disclosure to a successful
conclusion.
Policy review
In every company there will be a variety of
formal and non-formal policies which prescribe
the organisation’s intentions with respect to its
stakeholders. These may range from occupational
Inset 1. The Body Shop Mission Statement.
safety and health at work for employees (usually
very well documented) to customer service
(frequently expressed more through a company’s
culture than through any formalised system).
There may be dividend policies for shareholders,
payment terms for suppliers, codes of ethics for
company representatives working overseas, and
so on. Clear policies help provide a framework
for assessing the quality of a company’s relation-
ships with its stakeholders. Before any assessment
or audit of social relationships, a company should
be aware of its explicit and implicit intentions
with respect to each stakeholder group.
For The Body Shop’s first social audit, the
main policies against which performance was
judged were the company’s Mission Statement
and Trading Charter (Insets 1 and 2). More
specific policies and guidelines existed for health
and safety at work, human resources (managers’
 The Body Shop International 1449

Inset 2. The Body Shop Trading Charter.

and employees handbooks) and Fair Trade
(Community Trade programme). These were also
used as the basis for assessing the ability of man-
agement systems to deliver on policy commit-
ments.
Figure 2 outlines The Body Shop’s ethical
policies which underpin the ideals expressed in
its Mission Statement.
1450 Maria Sillanpää

Memorandum of Association

Mission Statement

Trading Charter

Human and Environment

Animal Protection
Civil Rights Sustainability

Statement of Bill of Rights Health and Against Animal

Environmental Endangered
Principles on for Staff Safety Animal Derived
Policy Species
Human Rights Policy Testing (AAT) Ingredients
Policy
Policy Policy

Managers Health and Environmental AAT

Fair Trade Handbook Safety Procedures
Guidelines Guidelines
Guidelines Manual

Employee Site Specific Site Specific

Handbook Health and Environmental
Safety Procedures
Procedures

Figure 2. Guide to The Body Shop International ethical policies.

Determination of audit scope choosing to concentrate mostly on U.K.-based

Because parallel systems exist at The Body Shop
for auditing and reporting on ethical perfor-
mance with respect to animal protection and the
environment, the subject area of the social audit
was restricted to people: human stakeholders
who may affect or be affected by The Body
Shop. The number of individual stakeholder
groups could theoretically be quite large and a
decision had to be taken as to which groups
should be included in the first and subsequent
audit cycles. The Body Shop took the view that
in the first cycle, the net should be cast as wide
and as deep as possible. But inevitably some
groups and sub-groups could not be reached for
practical reasons.
Another important factor in the scoping of a
social audit is geography. Where a company has
wholly or majority-owned operations in different
countries, a decision has to be taken as to
whether one or all countries are to be covered
in each cycle. For The Body Shop this meant
groups in the first cycle. So although some
information was gathered with respect to U.S.
franchisees and customers it did not constitute
the systematic effort that was devoted to the U.K.
social audit process.
The last factor to be taken into account in
scoping a social audit is the level to which
indirect stakeholders may be embraced. For The
Body Shop this required a decision about
whether, for example, staff of franchisees or non-
governmental organisations in franchised markets
should be consulted. It was decided that such
stakeholders were better consulted directly at
such a time when franchisees were able to
conduct their own audit processes.
The stakeholder groups for The Body Shop’s
first social audit included:
• Directly employed staff by The Body Shop
International
• International head franchisees
• U.K. and U.S. local franchisees
 The Body Shop International
• U.K. and U.S. customers
• Suppliers
• Community trade suppliers
• Shareholders
• Local community (Littlehampton)
• U.K. non-governmental organisations
• Foundation applicants.
Agreement of performance indicators
There are three types of performance measure-
ment in The Body Shop’s approach to social
auditing. They are:
1. Performance against standards (performance
indicators). These should reflect nationally
and internationally available information on
best practices for activities and policies that
describe the organisation’s social perfor-
mance. Measures may be both quantitative
and qualitative. Standards are agreed with
relevant departments which then have the
responsibility for collecting relevant infor-
mation. Data are submitted by the depart-
ments and validated by the audit and
verification processes.
Where appropriate, departments are
encouraged to set internal benchmarks/
targets relating to individual standards, and
to collate information on external bench-
marks. Therefore, the ideal set of reported
information relating to individual standards
should evolve towards the following format
(see Table II).
Where data are available, historical data
on performance indicators should be
reported at least for the preceding audit
cycle.
TABLE II
Ideal format for reporting performance indicators
Standard Performance Indicator
e.g. Employee Based on on-going internal
turnover monitoring; data and monitoring
process subject to internal
audit and verification
1451
2. Stakeholder perception of performance
against core values (i.e. The Body Shop
Mission Statement and Trading Charter).
These core values are essentially defined by
the organisation itself. Each stakeholder
group is consulted to establish their per-
ception of how closely the organisation’s
performance matches its stated aspirations.
3. Stakeholder perception of performance
against specific needs of stakeholders. These
needs are particular to individual stake-
holder groups. They are identified as salient
through consultation with stakeholders in
focus groups and measured in anonymous
and confidential surveys of opinion.
Stakeholder consultation
Qualitative measures are arguably the most
important barometer of human relationships. An
employee who feels he or she is treated fairly may
tolerate quite severe challenges in the workplace
but retain his or her loyalty and commitment. A
customer whose complaint is fixed without
quibble or debate may feel even better about a
company than if the product never disappointed
in the first place. For effective stakeholder inclu-
sion, perceptions are reality. A misunderstanding
is no less damaging to a relationship regardless
of whether the company or the stakeholder is to
blame.
Few major companies eschew market research
with customers. Indeed for many organisations
this is their most significant investment in stake-
holder inclusion. In order to systematically
measure the perceived quality of relationships
between other stakeholders and the firm, tech-
niques similar to market research need to be
Internal Benchmark/target External Benchmark
Based on target-setting by Based on publicly available
relevant department or data on e.g. industry
company performance
1452 Maria Sillanpää
deployed. In our experience, focus groups and
large scale confidential surveys of opinion where
the questions themselves are co-designed in focus
groups with stakeholder representatives can be
applied to almost any relationship.
Engaging stakeholders in direct dialogue is one
of the most important and sensitive processes in
social auditing. It is especially important to
identify salient issues for each group in face-to-
face conversation before conducting wide-scale
surveys of opinion. The Body Shop’s first social
audit engaged stakeholder groups in focus groups
to explore specific stakeholder needs and to allow
stakeholder views and concerns to be expressed.
To ensure open dialogue in the discussion, it was
considered important, especially for the initial
stages of the process, that the verifiers had access
to the process as observers.
Following the focus groups, when specific
issues had been identified as salient or of partic-
ular interest to stakeholders, questionnaires were
designed to measure more wide-scale opinion.
These questionnaires were intended to capture
perceptions of the company’s performance against
both stakeholder-specific needs and core values
articulated by the company.
Questionnaires were designed with profes-
sional assistance to avoid inadvertent introduc-
tion of bias. Space was also allowed on the
questionnaires themselves for open-ended com-
mentary on the company’s performance.
Surveys were done using the largest manage-
able sample size; respondents completed the
questionnaires anonymously and returned them
to an independent organisation for confidential
analysis. Only summary information and lists of
comments were submitted to The Body Shop for
inclusion in the audit process.
Following publication of the results of the
social audit, it was considered vital to obtain
feedback from stakeholders and engage them in
follow-up dialogue about how they reacted to
the findings presented in the Social Statement.
This process of dialogue helps shape future audit
cycles, enables indicators and data presentation
to be fine tuned for future cycles and helps set
priorities for future action by the company.
The internal management systems audit
There were three main sources of information
for The Body Shop’s first audit process: i) the
results of the focus groups and surveys described
above; ii) the documentary information provided
by departments which had agreed quantitative
and qualitative standards; and iii) the output from
confidential internal audit interviews with staff
and managers. This latter source of information
was based on the kind of “management systems”
structured interviews used in environmental and
quality management auditing. Checklists were
developed specifically for the purpose of the
interviews and results used to build up a dynamic
picture of departmental handling and knowledge
of issues and company policies relevant to social
performance.
During 1996/97 the internal management
systems audit was further developed toward an
integrated methodology whereby individual
departments were audited on management
systems relating to the company’s policies on
environment, animal protection, human
resources, communications, occupational health
and safety, information management and other
relevant ethical issues.
The audits result in time framed action plans
prioritising recommendations for proposed
improvements. The audit reports as well as
documentation relating to the auditing proce-
dures are made available to external verifiers. The
management systems audits are conducted by a
semi-independent audit team which reports
direct to the company’s Executive Committee.
Management audits are sometimes based on
professional codes and standards; this is especially
true of financial audits. With stakeholder rela-
tionships and social performance there are as yet
no professional or accredited international stan-
dards, although groups such as the Institute for
Social and Ethical Accountability are working
towards them.
Preparation of accounts – the Social Statement
The format chosen for The Body Shop’s first
Social Statement was based on a stakeholder
 The Body Shop International
model, with each group given its own section
within the report. An introductory section gave
a general explanation about the scope of the
social audit and how the information had been
compiled and what assumptions were used. The
company founders also gave their overview in a
Foreword thereby setting a tone to the
document.
Each stakeholder section then followed a
common format:
1. The basis for the company’s approach and
aims for each stakeholder group (with
reference to relevant policies etc.) as well
as basic information about the stakeholder
group (e.g. size, structural/contractual rela-
tionship to the company).
2. The methodology used for each consulta-
tion process (i.e. what combination of focus
groups, surveys and discussions were used
to capture stakeholder perceptions).
3. The results of stakeholder consultation with
perception surveys described in as even-
handed and neutral a way as possible so as
to avoid premature interpretation, together
with direct quotations from stakeholders
selected in an independent fashion.
4. Quantitative and qualitative standards of
performance where these existed.
5. A company response in the form of a quote
from a board member or senior manager
setting out their reaction to the audit results
and noting where progress is already being
made and/or where improvements were
clearly required (“Next Steps”).
The above format was based on the assumption
that by setting out the accounts in this way
promotes the dialogue process and allows stake-
holders to take a view on the adequacy or oth-
erwise of the company response. In order to
make the follow-on dialogue process efficient,
stakeholders receiving the Social Statement were
encouraged to complete a response card and
attend a discussion with representatives of the
company.
The final components of The Body Shop’s first
Social Statement were a verification statement
and a summary chapter on those stakeholders
who could not be included in the cycle, but
1453
should be in future cycles. The external verifi-
cation process should have an influence on the
tone, format and style of the Social Statement.
The extent of this influence is guided by the
verifier.
The Values Report 1995 consisted of three
separate statements on the company’s social,
environmental and animal protection-related
performance respectively. In an attempt to
develop the companies reporting towards greater
integration, the 1997 report comprises of a single
document, structured throughout in a stake-
holder-driven way, each stakeholder section
reporting on those aspects of environmental,
animal protection and social performance most
salient to a particular stakeholder group. Each
stakeholder section took the following format:
1. The basis for the company’s approach and
aims for each stakeholder group (with
reference to relevant policies with special
reference to policy developments within
the audit cycle).
2. A report on progress toward social audit
strategic targets and “Next Steps” com-
mitments made in the Social Statement
1995 and progress toward environmental
and animal protection strategic targets set
in respective statements.
3. The methodology used for each social audit
consultation process (i.e. what combination
of follow-up dialogue, focus groups,
surveys and discussions were used to
capture stakeholder perceptions).
4. The results of stakeholder consultation,
including: information on follow-up
dialogue; results of consultation exercises;
and, results of perception surveys where
applicable.
5. Quantitative and qualitative standards of
performance relating to environmental,
animal protection and social performance.
6. A company response in the form of new
targets in response to audit results.
Agreement of strategic and local objectives
As with environmental auditing and reporting, a
very important part of the process is to set
1454 Maria Sillanpää
strategic objectives for the business which can
help clarify the future priorities of the company
and unite all stakeholders behind a common
purpose. Setting strategic objectives and placing
these in the public domain requires a significant
amount of internal discussion, management com-
mitment and senior “sign-off ”.
Target setting provides perhaps the key
leverage for continuous improvement in any
auditing and public reporting context. The Body
Shop has had a formal target setting programme
within its environmental management system
since 1992. Both local and strategic targets have
been set based on audit findings and progress
reported on in public statements. Similar target
setting programmes were established for animal
protection and stakeholder-related performance
respectively when audit methodologies were
established for these during 1994/95.
Strategic objectives must also be underpinned
by subsidiary or localised objectives which apply
more specifically to individual stakeholder
groups. The latter are in some ways simpler to
negotiate because they involve fewer decision-
makers at the corporate level. However, the
endorsement and support of the company board
and central management committee are essential
if more localised objectives are to be executed
speedily and efficiently and kept in line with
wider business goals.
As mentioned earlier, the Social Statement
1995 included a response from the relevant board
member or senior manager to each stakeholder
section. All in all, 89 specific “Next Step” com-
mitments were made together with seven
company-wide strategic targets. The Values
Report 1997 reports on progress towards these
targets. The external verifiers assessed the
company’s claims towards these targets. The 1997
statement includes 97 new targets relating to the
company’s stakeholder/social performance as well
as 10 integrated targets where stakeholder/social
performance forms a component part.
Verification
As noted earlier, independent verification is now
accepted practice in financial accounting, envi-
ronmental management and quality. Based on
The Body Shop’s experience it is also of
enormous value in assessing and improving the
quality of relationships with stakeholders.
Organisations such as the U.K.-based think tank
New Economics Foundation have pioneered
techniques of “social audit” verification with
some success. It involves, for instance, docu-
mentation review, testing the veracity of numer-
ical accounts, examining the integrity of internal
management and audit systems and ultimately
signing off on the accuracy of published reports
as “true and fair” accounts. It has also proven
useful for the verifiers of a social/stakeholder
audit to convene advisory panels of experts in
particular stakeholder perspectives to comment
on the scope and adequacy of draft public
accounts.
Publication of statement
The Social Statement needs to be a true and fair
picture of the social impacts of the organisation,
in so far as the defined scope of the audit allows.
It needs to be comprehensive and systematic, but
above all be understood. Because of the complex
nature of a social audit and because of the variety
of stakeholder needs for information, a multi-tier
approach was adopted for the publication of The
Body Shop’s first Social Statement. The full
statement was published based on the approved,
verified accounts and made available to all stake-
holder groups.
In addition, more detailed information was
provided to employees on specific results relevant
to them and their part of the company. A
summary document of all the ethical statements
was produced for wider scale distribution
alongside even briefer material appropriate for
customers and other large audiences. In each case
readers were made aware of how they could
obtain more detailed information. The full Values
Report was also launched on the Internet.
Similarly, in 1997 a summary report – The
Road Ahead – was published aimed mostly at
general audiences. A special broadsheet have also
been produced for employees on the social audit
results relating to them.
 The Body Shop International
Follow-up dialogue and internal reports
Following publication of the results of the
company’s first social audit, stakeholders were
invited to engage in follow-up dialogue in order
to obtain feedback on how they reacted to the
findings presented in the Social Statement. The
aim of this process is to help shape future audit
cycles, enables indicators and data presentation
to be fine-tuned for future cycles and help set
priorities for future action by the company.
The departments responsible for specific stake-
holder relations were encouraged to enter into
direct dialogue with stakeholder representatives.
In some cases this dialogue has been facilitated
and/or attended by the audit team. The Values
Report 1997 includes details of this process as it
related to different stakeholder groups as well as
key resulting actions taken as a result of this
dialogue.
Conclusion
This paper has discussed The Body Shop’s
approach to social auditing as a practical tool for
increased social accountability and transparency
as well as a strategic management tool with
significant potential to facilitate continuous
improvement in corporate social performance
and stakeholder relationships. The paper placed
social auditing in the context of stakeholder
inclusion and argued that the emergent practice
of social auditing is consistent with the key prin-
ciples and best practice in environmental and
total quality management as well as the philos-
ophy of learning organisations and employee
empowerment. The key premise of the paper was
based on the argument that a systems-based
approach to stakeholder inclusion as reflected in
the practice of social auditing will become an
increasingly important component of corporate
strategy in years to come.
The Body Shop has found that its social
auditing has led to an increased understanding
of the company’s identity, with massive votes of
confidence by stakeholders in its values and
mission. Greater understanding of stakeholder
needs and aspirations is already leading to
1455
improved communication and business decision-
making by those departments responsible for
looking after individual stakeholder groups. The
Body Shop also believes that, in the future, fewer
mistakes will be made and less effort and
resources expended on inappropriate business and
stakeholder specific initiatives. In short, social
auditing and reporting, is not just an ethically
desirable activity, it is also a driver for improved
effectiveness for the organisation and enhanced
inclusion and thus support from stakeholders.
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