Context:
The Securities and Exchange Board of India (Sebi) recently revised compliance rules for the Social Stock Exchange (SSE), drawing attention to the growing role and constraints of social impact auditors professionals who verify the real-world impact of social enterprises.
Key Updates:
- Sebi Circular (19 September 2025): Mandatory Annual Impact Report (AIR) audits now apply only to social enterprises that have successfully raised funds through the SSE.
- Non-compliance can attract penalties ranging from ₹1 lakh per day to ₹1 crore, along with potential delisting and loss of tax benefits.
- SSE-listed entities rely on social auditors to ensure that funds raised result in genuine, measurable social impact.
Social Auditors & Challenges:
- Around 1,000 social auditors are currently enrolled under ICAI, ICSI, and ICMAI-linked self-regulatory organizations.
- Their role includes linking non-profit activities to Sebi-defined measurable indicators (e.g., beneficiaries reached, income improvement, access to education or healthcare).
- Challenges include limited professional capacity, standardization gaps, data collection, field verification, and logistical costs, especially for smaller NGOs.
- Auditors use tools such as Social Return on Investment (SROI) and Environmental, Social, and Governance (ESG) ratings to quantify social impact.
Social Stock Exchange (SSE):
- Launched in 2022, SSE allows non-profits and social enterprises to raise funds from the public.
- Instead of shares, NGOs can list Zero Coupon Zero Principal (ZCZP) instruments.
- As of May 2025, over 200 NGOs are registered on SSE platforms managed by BSE and NSE.
