Three unrelated developments have the potential to make corporate social responsibility (CSR) initiatives necessary monitorable for the average investor:
Companies under pressure to act responsibly:
Social movements garner public support and sympathy – compelling companies to demonstrate their support. Socially responsible actions of companies are coming at a cost that investors need to be aware of. For instance, HUL dropped the word ‘Fair’ from its popular and profitable skin cream brand Fair & lovely. Change in the name of a decades-old brand could have some impact on the sales of the skin product, something investors would be keen to quantify. Globally, UnileverNSE -0.29 % and other consumer companies pulled their advertising from Facebook as part of the ‘stop hate for profit’ campaign, which wants the social network to implement stricter measures to curb hateful and racist content.
Proposal to allow the trading of CSR Credits:
A Sebi-constituted panel in its report last month has, among other things, proposed the allowing of CSR spends to be traded between companies with excess CSR spends and those with deficient CSR spends on the social stock exchange. The idea of such a bourse was first floated in the 2019 budget. The proposal, if adopted, can help companies with a poor track record of undertaking CSR practices to buy CSR credits to comply with the law. Another proposal of the panel is to make expenditure toward CSR tax-deductible, which again will make CSR a financial-statements item for investors to closely examine.
Article: Economic Times