Business & Society in Nepal: Ethics, CSR, Stakeholders & Policy

Key Concepts and Frameworks

1. Business and Society: A Dynamic Relationship

Businesses do not operate in isolation; they are deeply embedded in society. This relationship is shaped by:

• Economic interdependence: Businesses rely on society for resources (labor, raw materials, markets), while society depends on businesses for employment, goods, and services.
• Social responsibility: Businesses must balance profit-making with addressing societal needs (e.g., poverty, education, environmental sustainability).
• Institutional pressures: Laws, cultural norms, and stakeholder expectations influence business behavior.

Worked Example: Nabil Bank’s Financial Inclusion Program Nabil Bank, one of Nepal’s largest commercial banks, launched the "Nabil Samriddhi" program to provide microfinance and financial literacy to rural and underserved populations. This aligns with Nepal’s National Financial Inclusion Strategy (2015–2025) and addresses societal needs while ensuring long-term profitability.

• Impact: Over 1 million accounts opened, empowering women entrepreneurs in remote areas.
• Business Benefit: Strengthened brand reputation, customer loyalty, and compliance with central bank regulations.

2. Stakeholder Theory: Who Matters to Business?

Stakeholder theory argues that businesses must consider the interests of all parties affected by their operations, not just shareholders. Key stakeholders in Nepal include:

Visual: Stakeholder Map for a Nepali Business

Case Study: Daraz Nepal’s Stakeholder Balance Daraz, the Alibaba-backed e-commerce giant in Nepal, faces pressure from multiple stakeholders:

• Customers: Demand fast delivery and low prices.
• Suppliers: Expect fair treatment and timely payments.
• Government: Requires tax compliance and job creation (e.g., hiring local delivery agents).
• Environmental Groups: Criticize packaging waste and carbon footprint. How Daraz Responds:
• Customer: Introduced "Daraz Mart" for essential goods during lockdowns.
• Suppliers: Partnered with Small and Medium Enterprises (SMEs) for local sourcing.
• Government: Paid 13% VAT on time and lobbied for digital trade policies.
• Environment: Piloted eco-friendly packaging in Kathmandu.

3. Corporate Social Responsibility (CSR) in Nepal

CSR refers to a business’s voluntary actions to address social, environmental, and economic challenges beyond legal requirements. In Nepal, CSR is increasingly linked to licensing, tax benefits, and brand reputation.

Types of CSR Activities in Nepal

Worked Example: Ncell’s "Digital Nepal" Initiative Ncell, Nepal’s largest telecom operator, launched "Digital Nepal" to bridge the digital divide:

• Goal: Provide internet access to 1 million rural households by 2025.
• How:
  • Subsidized 4G towers in remote areas.
  • Trained youth as digital entrepreneurs.
  • Partnered with NGOs for last-mile connectivity.
• Impact:
  • Increased mobile internet penetration from 50% (2018) to 70% (2023).
  • Created 5,000+ jobs in rural areas.
• Business Benefit: Expanded customer base, improved brand image, and aligned with Nepal’s Digital Strategy 2025.

Visual: CSR Framework for Nepali Businesses

flowchart TD
    A["Business Goals"] --> B["Profitability"]
    A --> C["Legal Compliance"]
    A --> D["CSR Initiatives"]
    D --> D1["Philanthropy"]
    D --> D2["Education"]
    D --> D3["Environment"]
    D --> D4["Healthcare"]
    D --> D5["Employment"]
    D --> E["Stakeholder Satisfaction"]
    E --> F["Brand Reputation"]
    F --> G["Long-term Profit"]

4. Business Ethics in Nepal

Ethics refers to principles of right and wrong that guide business decisions. Key ethical challenges in Nepal include:

• Corruption: Bribery in procurement (e.g., public contract scandals).
• Exploitation: Child labor in brick kilns (despite Child Labor Act 1996).
• Environmental Harm: Illegal logging, plastic pollution.
• Data Privacy: Misuse of customer data by fintech apps (e.g., Khalti leaks).

Case Study: Himalayan Java’s Ethical Sourcing Himalayan Java, Nepal’s largest tea exporter, faces ethical dilemmas in its supply chain:

• Problem: Small tea farmers often receive below-market prices due to middlemen.
• Solution: Direct sourcing and fair trade certification.
• Impact:
  • Farmers’ income increased by 30%.
  • Reduced child labor in tea gardens.
  • Enhanced global market access (exported to USA, Europe).

Visual: Ethical Decision-Making Model

flowchart TD
    A["Ethical Dilemma"] --> B{"Is it Legal?"}
    B -->|"Yes"| C{"Is it Fair?"}
    C -->|"Yes"| D{"Does it Build Trust?"}
    D -->|"Yes"| E["Implement"]
    B -->|"No"| F["Re-evaluate"]
    C -->|"No"| F
    D -->|"No"| F

5. Government Policies and Business Regulation

Nepal’s business environment is shaped by laws, regulations, and policies. Key ones include:

Worked Example: NEPSE’s CSR Disclosure Rules The Nepal Stock Exchange (NEPSE) requires listed companies to:

1. Spend at least 2% of their profit on CSR.
2. Disclose CSR activities annually in their reports. Example: CG Group spent ₹200 million in 2023 on:

• Education: Built 50 schools.
• Healthcare: Free medical camps in 10 districts.
• Environment: Afforestation in Chitwan.

6. Challenges of Business-Society Interface in Nepal

7. Case Study: Chaudhary Group’s Balancing Act

Chaudhary Group (CG), Nepal’s largest conglomerate (oil, cement, FMCG, banking), exemplifies the business-society interface.

Key Initiatives

1. CSR:
   • "CG Foundation": Built 100+ schools, provided scholarships to 5,000 students.
   • Healthcare: Free eye camps, COVID-19 relief (₹500 million).
2. Stakeholder Management:
   • Employees: ₹10,000 bonus during festivals, safety training.
   • Customers: Subsidized fuel during crises (e.g., 2021 fuel shortage).
   • Government: ₹50 billion tax revenue annually, job creation (50,000+).
3. Ethical Challenges:
   • Criticism: Accused of price gouging during fuel shortages.
   • Response: Transparency in pricing, public hearings.

Visual: CG Group’s Stakeholder Engagement

In the Real World

1. eSewa and Digital Financial Inclusion

   • Idea Used: Stakeholder Theory + Government Policy
   • How: eSewa, Nepal’s leading digital wallet, serves multiple stakeholders:
     • Customers: Easy bill payments, remittances.
     • Merchants: Low transaction fees, instant settlements.
     • Government: Promotes cashless economy, reduces black money.
     • Challenge: Data security risks (e.g., 2021 hacking incident).
   • Real Example: During the 2020 lockdown, eSewa processed ₹20 billion in transactions, helping small businesses survive.

2. Pathao’s Gig Economy Model

   • Idea Used: Social Responsibility + Ethical Employment
   • How: Pathao, Nepal’s Uber-like app, addresses:
     • Unemployment: Provides flexible jobs to 10,000+ drivers.
     • Traffic Congestion: Uses AI routing to optimize trips.
     • Safety: Background checks for drivers.
   • Criticism: Low wages (₹400–₹600/day), no benefits.
   • Response: Introduced "Pathao Plus" (higher pay for premium rides).

3. Nabil Bank’s Microfinance for Women

   • Idea Used: CSR + Social Stratification
   • How: Nabil Bank’s "Nabil Samriddhi" targets rural women (often marginalized due to caste and gender biases):
     • Loan Terms: Small loans (₹50,000–₹500,000) with low interest (12–15%).
     • Impact: 70% repayment rate, 50% of borrowers are first-time entrepreneurs.
   • Why It Works: Aligns with Nepal’s Women’s Economic Empowerment Policy (2018).

Exam Tip

This unit is highly application-based. Expect:

1. Case Study Questions (30–40 marks):

   • Analyze how a Nepali company (e.g., CG Group, Ncell, Daraz) balances profit, ethics, and CSR.
   • Example Question: "How does Pathao address the needs of its drivers, customers, and the government? Discuss with examples."
   • Answer Structure:
     • Introduce stakeholder theory.
     • List 3 stakeholders and their expectations.
     • Give real examples (e.g., driver wages, AI routing).
     • Conclude with challenges and solutions.

2. Compare and Contrast (15–20 marks):

   • Example: "Compare the CSR strategies of Nabil Bank and Himalayan Java."
   • Use a table (like the one above) to highlight differences.

3. Policy Analysis (10–15 marks):

   • Explain how one policy (e.g., Labor Act 2017) affects a business (e.g., NTC’s hiring practices).
   • Key Points:
     • Provisions of the act.
     • Impact on business (costs, compliance).
     • Case example (e.g., NTC hiring diversely-abled workers).

4. Short Notes (5 marks each):

   • Common Topics:
     • Corporate Social Responsibility (CSR) in Nepal.
     • Stakeholder theory with examples.
     • Business ethics vs. profit maximization.
     • Role of government in business regulation.

Pro Tip:

• Relate everything to Nepal. Examiners love real-world examples.
• Use bullet points and tables for clarity (saves time in exams).
• Memorize key acts/policies (e.g., Company Act 2063, Labor Act 2017).