Business Ethics & CSR: Definitions, Models, Cases & Nepali Applications

TAKEAWAYS:

• Business ethics is the application of moral principles to business decisions, balancing profit with fairness, transparency, and legal compliance (e.g., Ncell’s data privacy policies).
• Corporate Social Responsibility (CSR) extends beyond profit to include environmental sustainability, community development, and ethical labor practices (e.g., Himalayan Java’s fair-trade coffee).
• The Friedman Doctrine argues that a company’s sole responsibility is to maximize profits within the law, while modern CSR views businesses as accountable to stakeholders (customers, employees, society).
• Managerial ethics focuses on leaders’ integrity in decision-making (e.g., Pathao’s driver safety protocols vs. profit cuts).
• Ethical dilemmas arise when short-term gains conflict with long-term trust (e.g., Daraz’s late deliveries vs. customer loyalty).
• Technology enables ethics (e.g., eSewa’s fraud detection) but also raises risks (e.g., WhatsApp’s data privacy concerns).

1. Definitions: Ethics vs. CSR vs. Friedman Doctrine

Core Definitions

mindmap
  root((Business Ethics & CSR))
    Business Ethics
      "Moral principles guiding business decisions"
      "Balances profit, legality, and fairness"
      Examples: Whistleblowing, anti-bribery policies
    Corporate Social Responsibility (CSR)
      "Voluntary actions beyond legal requirements"
      "Triple Bottom Line: People, Planet, Profit"
      Examples: Nabil Bank’s tree-planting drives
    Friedman Doctrine
      "Profit maximization is the *only* social responsibility"
      "Within the law and ethical customs"
      Criticism: Ignores long-term societal impact

Key Terms

2. Theories and Models of Business Ethics

A. Ethical Theories

flowchart TD
  A["Ethical Theories in Business"] --> B["Utilitarianism"]
  A --> C["Deontological Ethics"]
  A --> D["Virtue Ethics"]
  A --> E["Stakeholder Theory"]

  B --> B1["'Greatest good for the greatest number'"]
  B --> B2["Example: Kathmandu’s bulk discounts (benefits many customers)"]

  C --> C1["'Duty-based' ethics (Kant’s Categorical Imperative)"]
  C --> C2["Example: Ncell’s 'no call-drops' guarantee"]

  D --> D1["Focus on moral character (e.g., honesty, integrity)"]
  D --> D2["Example: Himalayan Java’s transparent supply chain"]

  E --> E1["Balances interests of all stakeholders"]
  E --> E2["Example: Pathao’s driver bonuses for safety records"]

B. CSR Models

mindmap
  root((CSR Models))
    Caroll's Pyramid
      "1. Economic (Profit)"
      "2. Legal (Compliance)"
      "3. Ethical (Expected)"
      "4. Philanthropic (Desired)"
    Global Reporting Initiative (GRI)
      "Standardized sustainability reporting"
      Example: Daraz’s GRI-compliant labor reports
    Stakeholder Theory
      "Business exists to serve all stakeholders"
      Example: NTC’s consumer feedback portals

3. Business Ethics in Practice: Nepali Cases

Case 1: Nabil Bank’s Ethical Dilemma (Loan Scams)

Scenario: In 2021, Nabil Bank faced allegations of loan fraud where branch managers approved loans without proper checks, leading to NPR 1.2 billion in losses. The bank’s CEO publicly apologized and implemented:

• Whistleblower protections for employees reporting misconduct.
• AI-driven fraud detection in loan processing.
• Transparency reports on loan approvals.

Ethical Analysis:

Case 2: Daraz’s Labor Practices vs. Profit Pressures

Scenario: Daraz, Nepal’s largest e-commerce platform, faces criticism for:

1. Low wages for warehouse workers (minimum wage = NPR 12,000/month).
2. Long hours (12-hour shifts during peak sales like Dashain).
3. Lack of unions (workers fear retaliation).

CSR vs. Friedman Doctrine:

Real-World Impact:

• 2022 Dashain: Daraz offered bonuses to workers who met delivery targets, reducing overtime complaints.
• 2023: Partnered with NGOs to train workers in digital skills (aligning with stakeholder theory).

4. Managerial Ethics: Leaders’ Role

Key Ethical Challenges for Managers

flowchart LR
  A["Managerial Ethics Challenges"] --> B["Conflict of Interest"]
  A --> C["Whistleblowing"]
  A --> D["Sustainability Trade-offs"]
  A --> E["Digital Privacy"]

  B --> B1["Example: Ncell manager approving family’s SIMs at discount."]
  C --> C2["Example: NTC engineer reporting bribes for license renewals."]
  D --> D3["Example: Pathao’s EV shift vs. higher driver costs."]
  E --> E4["Example: eSewa’s data leaks during KYC updates."]

Ethical Decision-Making Framework

flowchart TD
  A["Step 1: Identify the Problem"] --> B["Step 2: Gather Facts"]
  B --> C["Step 3: Define Stakeholders"]
  C --> D["Step 4: Explore Alternatives"]
  D --> E["Step 5: Evaluate Ethics"]
  E --> F["Step 6: Make Decision"]
  F --> G["Step 7: Monitor & Review"]

  E --> E1["Ask: Is it legal? Fair? Right?"]
  E --> E2["Example: Daraz’s 'no layoffs' policy during COVID."]

5. Business Ethics and Technology

How Tech Enables (or Violates) Ethics

6. Common Ethical Dilemmas in Nepali Business

A. Profit vs. Social Responsibility

Example: Khalti’s Merchant Fees

• Profit-Driven Approach: Charge 3% fee (standard in Nepal).
• CSR Approach: Waive fees for small businesses (e.g., local kirana stores).
• Outcome: Khalti’s #SupportLocal campaign increased user trust by 20%.

B. Environmental Ethics

Example: NTC’s Solar Power Push

• Dilemma: High upfront cost vs. long-term sustainability.
• Solution: Partnered with Himalayan Java to power telecom towers with solar.
• Result: 30% reduction in diesel costs; GRI-certified project.

C. Labor Exploitation

Example: Garment Factories in Kathmandu

• Issue: Underpayment, child labor (e.g., Mazdoor Garments).
• Ethical Response:
  • Fair Wear Foundation certification for some brands.
  • Minimum wage hike (NPR 15,000 → NPR 18,000 in 2023).

7. Exam Tip: How to Score Full Marks

Do’s and Don’ts for TU/PU Exams

Sample High-Scoring Answer Structure

Question: "Analyze how a Nepali business can balance profit and social responsibility using the Friedman Doctrine and Stakeholder Theory."

Answer Framework:

1. Introduction: Briefly define both doctrines.
2. Friedman’s View:
   • "Profit maximization is the sole responsibility."
   • Nepali Example: A local bakery in Pokhara may cut costs by using cheaper flour (hurting farmers).
3. Stakeholder Theory:
   • "Businesses must serve all stakeholders."
   • Nepali Example: The bakery could pay premium prices to organic farmers, increasing costs but gaining loyalty.
4. Balance:
   • Short-term: Follow Friedman (e.g., Khalti’s 3% fees).
   • Long-term: Adopt CSR (e.g., Khalti’s #SupportLocal).
5. Conclusion: "While profit is essential, ethical practices like stakeholder engagement ensure sustainability."

8. Real-World Applications: Where You See This Daily

## In the Real World

1. eSewa’s Ethical Hackathons

   • Idea Used: Stakeholder Theory (customers, developers, regulators).
   • How: eSewa hosts annual hackathons to improve fraud detection, involving ethics committees to ensure user privacy.

2. Ncell’s "Digital Inclusion" Program

   • Idea Used: CSR + Technology.
   • How: Ncell provides free SIMs to rural schools, using blockchain to track usage and prevent resale.

3. Daraz’s "Dashain Delivery Challenge"

   • Idea Used: Utilitarianism (greatest good for most customers).
   • Ethical Dilemma: Workers forced to work 16-hour shifts to meet demand.
   • Solution: Daraz introduced shift swaps and bonuses to reduce burnout.

4. Nabil Bank’s Green ATMs

   • Idea Used: Environmental Ethics.
   • How: Installed solar-powered ATMs in rural areas, reducing carbon footprint while improving access.

5. Pathao’s Driver Safety App

   • Idea Used: Managerial Ethics.
   • How: Pathao’s "Safety Score" penalizes drivers for reckless behavior, balancing profit (fewer accidents) with driver welfare (fair penalties).

9. Quick Revision Table

10. Case Study: Himalayan Java’s Ethical Coffee

Scenario: Himalayan Java, Nepal’s largest coffee exporter, faces ethical challenges in its supply chain:

1. Fair Trade Certification: Ensures farmers get 20% higher prices.
2. Child Labor: Some small farms employ children (banned under Nepali law).
3. Environmental Impact: Deforestation for coffee plantations.

Ethical Strategies:

Exam Link:

• Question: "How does Himalayan Java balance profit and ethics?"
• Answer: "By adopting CSR strategies like Fair Trade, they ensure long-term profitability through stakeholder trust (farmers, consumers, regulators)."

Final Exam Checklist

Before the test, ensure you can:

1. Define all key terms (ethics, CSR, Friedman Doctrine).
2. Compare Friedman vs. Stakeholder Theory in a table.
3. Analyze a case (e.g., Nabil Bank, Daraz) using ethical frameworks.
4. Link tech (AI, blockchain) to ethical dilemmas.
5. Critique Nepali business practices (e.g., "Most SMEs ignore CSR due to lack of awareness").

Good luck! 🚀