The new CSR law is both delighting and terrifying: Nohria

Says while it allows businesses to do good to society, it could also be abused

Harvard Business School dean, Nitin Nohria today said that the new Corporate Social Responsibility  law that the Indian government is planning to bring in, is  both delighting and terrifying.

"I am simultaneously delighted and terrified by the CSR law that will be enacted in India shortly. I am delighted as it creates opportunities for businesses to do remarkable good in society. But I am terrified too as this policy could be abused. Only time will tell," Nohria said addressing a gathering of businessmen in Mumbai today.

India is planning to bring in a CSR law wherein, companies with a net worth of more than Rs 500 crore or revenue of more than Rs.1,000 crore or net profit of more than Rs 5 crore would have to spend at least  2 per cent of their average net profits of the preceding three years on CSR. Though the law does not stipulate penalties for non-compliance, companies are required to justify any shortcoming in this regard.

According to a March report published in Forbes India magazine, the new regulation would imply that the top 100 companies by annual net sales in 2012 will spend Rs 5,611 crore on CSR activities, against the present Rs 1,765 crore. At present, government-owned companies spend significantly on CSR.

The new law would state around 15 segments including--- education, rural skill development and sports among others-- under the CSR ambit.

"This is a great opportunity for business to demonstrate the good it can do to society. Business people can think very hard of how to create share value for society and create profit in a way that has a broad social purpose," Nohria said.

Nohria added what people have lost confidence in today, is, are people making profit decently. "We should care deeply about doing business decently as business people because if we don't, we will lose the trust of society. If the moral environment is strong, society's respect and belief in business is strong as well," he added.