Friday, August 9, 2013

Companies Bill and CSR to impact Indian Social Media investments

Companies Bill passed in the Indian parliament, and changing consumer trends are set to fuel the next wave in the domain of sustainability.

One of the biggest challenges in sustainability till now has been the unwillingness of consumers to pay more for goods that took care of the society. The products that did well did so by providing greater economic advantage such as the Prius or CFLs.

The good news is that through gradual rise of concerns about the environment seen in reflections on the series of natural calamities faced by India and the world, consumers are now willing to shell out a bit more to get an sustainable value.

A recent study by Nielsen that surveyed more than 29,000 global respondents found out that the percentage of people willing to reward companies that gave back to the society had increased to 50% in 2013 from 45% in 2011.

For India, these trends will get a shot in the arm by the Rajya Sabha passing the companies bill (08th Aug, 2013). 

After the law is put in place, it will require companies to spend 2% of their average net profit of three years on corporate social responsibility (CSR) activities.  However, the norm is valid only for companies with net worth of more than Rs 500 crore or a turnover of more than Rs 1,000 crore.

Companies that take this 2% and use it to make their product sustainable should do better than companies that just spend on CSR to meet regulatory requirements. This extra 2% directly merges with the broader shift in consumer preferences towards socially responsible organizations.

This becomes an important opportunity for Social Media as an important mode of communication. To make best use of a sustainable product, it will be important to communicate its "sustainability" aspect to tap into changing consumer preferences.

In India more than 81% of online population is under the age of 30 years (as on 8th April, 2013). This is also the age that shows the highest percentage to reward socially responsible companies (figure above). It makes Social Media a very important channel for communicating responsibility created by companies in India. As this market is clearly segmented and easily target-able, it should lead to a greater investment on Social Media in coming years as companies start using the mandatory 2% of their profits for CSR.