Unit 6 : Business Ethics &

CSR in Nepal

Tribhuvan University
Nepal
 B USINESS E THICS O F N EPALESE
F IRMS integrity is a consistency of form in
 Business
conduct and behavior that, for any firm that
seeks to achieve it, earns the respect of its
peers and the trust of its clients. Reinforced
by a robust code of ethics, business integrity
can be achieved in the application and
enforcement of a set of guiding principles
governing the actions of the firm, its staff
and business partners.
 Experts on ethical business have said that
unfair business practices and lack of clear
procedures and policies are hindering S- 2
promotion of ethical business practices in
Nepal.
 B USINESS E THICS O F N EPALESE
F IRMS
“Life needs to be honored. Ethics is simply
honoring that period between birth and
death. This is the basic rule of ethics – What
we don‟t want others to do to us; we don‟t do
that to others. Ethics needs to be inculcated,
cultivated and nurtured. The seed is already
present in every human being, it is already
there, it just needs a little more nurturing-in
politics, business, faith-based organizations,
and also in civic society. If all these four
institutions work together, we can definitely
make a difference in this coming century.”
S- 3
H.H. Sri Sri Ravi
Shankar Founder,
 B USINESS E THICS O F N EPALESE
F IRMS
 Nepal has passed through a decade of violent
armed conflict (1996-2006) followed by another
transitional decade of conflict resolution and
peace building (2006-2016).
 Finally Nepal‟s Constituent Assembly promulgated
a new Constitution on 20 September 2015. But
again the devastating earthquake of April 2015
and the political agitation in the southern Terai
districts accompanied by a blockade of the Nepal-
India border has caused continued political,
economic and social turmoil.
 These events have affected Nepal‟s ability to
transform into a stable nation. As a result
S- 4
corruption has taken root in all sectors, including
the functioning of the state where it has grown.
 Shortcuts in doing business are
not uncommon in many parts of
the world. However, in the
context of Nepalese business
scenario, the shorter routes have
unfortunately become rules
rather than exceptions.
 The corruption in all sectors,
adulteration, cartels and
syndicates, tax evasion and
other unfair and unethical
practices often makes media
headlines in Nepal.
 On the ground, this has caused
severe impacts on business –
the cost of doing business
increases, competition becomes
skewed, and negativity and
 B USINESS E THICS O F N EPALESE
F IRMS
 Within this context, National Business Initiatives
(NBI) decided to prepare a long-term program on
“Business Ethics in Nepal” with a vision of bringing
private sector together in a collaborative
commitment to promote ethical and responsible
practices.
 On 2nd September 2012, the executive committee
of the National Business Initiative (NBI) decided on
the goal of uniting the private sector to work
towards promoting ethical business practice through
July 2013.
adherence and implementation of the Business Code
of Conduct.
 Understanding the current status of Nepalese
S- 6
private sector with regard to the ethical business
practices was necessary for laying down the
B USINESS E THICS O F N EPALESE
F IRMS

S- 7
 B USINESS E THICS O F N EPALESE
F IRMS
National Commitment
 On 28 July 2013 NBI bought Nepalese private sector
together for declaring a Code of Conduct for
effectively promoting ethical practices in business.
The event on “Private sector Declaration on Ethical
Business Practices” was inaugurated by then Prime
Minister Khil Raj Regmi.
 At the event participating private sector
organizations and companies expressed solidarity
and commitment for ethical practices by reciting
the 26-point NBI Business Code of Conduct Concepts.
 The event was made possible by joint coordination of
representatives of Government, international
organizations and donors, Nepalese businesses, civil
 B USINESS E THICS O F N EPALESE
 F IRMS
NBI organized another event to complement the first effort: The
first ever Responsible Business Summit of Nepal in December
2014. This event brought together CEOs and top managers of
nearly 500 companies.
 More than 50 national and international speakers deliberated on five
themes – Leadership and Management Systems, Brand Building,
Operational Efficiency, Community Engagement, and Collective
Actions.
 NBI distilled the proceedings of this path-breaking event into a
Managers‟ Guidebook for Responsible Business in Nepal 2015.
 One key highlight of this event was a panel which included not only
business organizations represented by NBI but also civil society
represented by the
senior academics Himalayan
from ClimateofInitiative,
two universities Nepal and a youth based S- 9
donors
NGO;
represented by GIZ‟s German-Nepal Project on Inclusive
Develop- ment of Economy.
 B USINESS E THICS O F N EPALESE
F IRMS
Long-term Commitment
 NBI stands for and is with the Nepali businesses in the
belief that the foundations of business must not be
built on unscrupulous and unethical practices.
 The challenging task that we have taken upon ourselves
can only be addressed through partnerships. It is a long
term commitment as achievements on these fronts can
be slow and therefore the impacts are difficult to
quantify.
 We, however, are clear that when a shift to ethical
practices begins in the business community, it will
gather momentum. We are confident that our modest
beginning and the road that we have charted are
founded on solid values. S- 10

 We wish the best outcome for the World Forum for

 Business

A CODE OF CONDUCT a set of rule

is
outlining social and and
the norms of, rules
responsibilities or proper
practices for, an individual, party or
organization. Related concepts
include ethical, honor, moral codes S- 11
and religious laws.
 B USINESS C ODE O F C ONDUCT
 In its 2007 International Good Practice Guidance,
"Defining and Develo- ping an Effective Code of
Conduct for Organizations", the International
Federation of Accountants provided the following
working definition:
 "Principles, values, standards, or rules of behavior
that guide the decisions, procedures and systems of
an organization in a way that (a) contributes to the
welfare of its key stakeholders, and (b) respects the
rights of all constituents affected by its operations."
 A common code of conduct is written for employees of
a company, which protects the business and informs
the employees of the company's expectations.
 It is ideal for even the smallest of companies to form a
S- 12

document containing important information on

expectations for employees. The document does not
B USINESS C ODE O F C ONDUCT ,
FNCCI
1. This Code of Conduct shall
be called Business Code of
Conduct of FNCCI, 2061 and
shall be referred to
hereinafter as Code of
Conduct.

2. This Code of Conduct shall

come into force
immediately.

3. Members of all associations

and organizations affiliated toS- 13
the FNCCI shall make special
efforts in abiding by the terms
 B USINESS C ODE O F C ONDUCT ,
FNCCI shall hereby undertake to:
4. All members

a) Refrain from engaging in business activities

that goes against the interest of the State.
b) Pay special attention to the protection and
promotion of public welfare in the conduct of
their business. Desist from activities that
jeopardize fair conduct and public norms and
values.
c) Abstain from activities considered
detrimental to the general health of the
people.
. S- 14
d) Maintain smooth supply of quality goods
and services in the market at fair prices.
 B USINESS C ODE O F C ONDUCT ,
FNCCI
e)Refrain from activities likely to cause artificial
shortages of goods in the market. In the event of
any shortages, shall not conduct business at
unfair prices.
f) Abstain from the usage of merchandise or
standards prohibited by law.
g)Maintaining faith in fair business competition,
provide maximum benefit to the consumers.
h)Oppose monopolistic business practices and
controlled supply systems (e.g. syndicates and
cartels) and not be involved in any such S- 15
groups or systems.
 B USINESS C ODE O F C ONDUCT ,
FNCCI
j) Give precedence to business transparency.
k)Make fair and proper utilization of credit
and loans.
l) Show special sensitivity towards
environmental protection.
m)Abide by prevalent statutes, laws and
process.
n)Submit documents, papers, statements of
accounts as well as pay taxes, tariffs and
levies as required by law in time.
S- 16

o)Abstain from dealing in any goods

 B USINESS C ODE O F C ONDUCT ,
FNCCI

p)Refrain from providing donations or

financial assistance to political parties or
their leaders with considerations of bearing
in business deals or for personal benefits.
q)Fix a ceiling of the value of any gift or
present to anyone as not to exceed
Rs.5,000.
r) Observe the Business Code of Conduct
endorsed by the FNCCI by self as well as S- 17
encourage others also to do likewise.
 C ONSUMER P ROTECTION C OUNCIL ,
N EPAL
 The Consumer Protection Council
is the apex consumer protection
agency of the Government of
Nepal established to promote
and protect consumers‟
interests.
 According to the CPC, it would
achieve success „when Nepali
consumers can be described as well
protected, getting their
money‟s worth, knowledgeable about the market place and its
mechanisms, vigilant about what takes place in it, assertive
about their rights and conscious of their responsibilities‟.
Its core activities are: to inform consumers; to eliminate S- 18
hazardous products from the market and ensure that products
and service comply with required standards and to receive,
 C ONSUMER P ROTECTION C OUNCIL ,
Functions,N EPAL
Duties and Powers of the Council
(a)To offer suggestions to the Government on
matters relating to the protection of the rights
and interests of consumers, the supply system,
and prices, quality and purity of consumer goods
and services.
(b)To disseminate information relating to the rights
and interests of consumers in order to inform
them about the standard of goods and services
so as to protect them in matters concerning
consumer goods and services.
(c)To inform consumers about the prices, quality, S- 19
quantity and purity of consumer goods and
services, as well as about unfair trading practices
 C ONSUMER P ROTECTION C OUNCIL ,
Functions,N EPAL
Duties and Powers of the Council (contd…)
(d)To conduct studies in connection with the
protection of the rights and interests of
consumers, or make arrangements for
doing so.
(e)To offer suggestions to the Government
on changing the existing policies or
framing new policies relating to the
protection of the rights and interests of
consumers.
(f)To maintain updated national and
international information relating to the
protection of the rights and interests of
 C ONSUMER P ROTECTION C OUNCIL ,
N EPAL
Functions, Duties and Powers of the Council (contd…)
(g)To monitor the rights of consumers, or
make arrangements for doing so, and
offer suggestions to the Government to
rectify the shortcomings noticed in the
course of such monitoring.
(h)To discharge the functions prescribed by
the Government, or make arrangements
for doing so
(i)To discharge such other functions as are
deemed appropriate for the protection of
the rights and interests of consumers, or
PROTECTION & PROMOTION OF CONSUMER
RIGHTS
 For the purpose of protecting the
rights and interests of
consumers, the Nepal Govt.
ensures that every consumer shall
have the following rights:
(a)Right to be protected from the
sale and supply of consumer
goods and services which
may harm life, body, health
and property.
(b)Right to be informed about the prices, attributes,
quantity, purity, quality, etc. of consumer goods
and services so as to be safe from unfair trading S- 22
practices.
PROTECTION & PROMOTION OF CONSUMER RIGHTS
(d) Right to be assured that
an appropriate agency
will hear matters
concerning the
protection of the rights
and interests of
consumers.
(e) Right to be heard and
compensated against
exploitation and
hardships resulting
from unfair trading
S- 23
practices.
(f) Right to consumer
 P ROHIBITION T O I NFLUENCE D EMAND ,
S UPPLY A ND P RICE
 Nepal business ethics portrays that no one
shall influence the demand, supply and
price of any consumer good or service by
taking any of the following actions in
collusion with others:
(a) By fixing the quota of raw materials
needed for any consumer good, or
reducing the production of any consumer
good, or taking any other similar actions.
(b) By hoarding any consumer good or
service or otherwise creating an
artificial shortage, or selling and
supplying such good or service at
 P OWER TO S YSTEMATIZE AND C ONTROL
S UPPLY OF C ONSUMER G OODS A ND
S ERVICES
 For the purpose of protecting the rights and
interests of consumers, the Government of
Nepal shall exercise the following powers in
order to systematize, control and regulate
the supply of consumer goods and services:
(a)To formulate policies relating to the
quality, price and the supply system
of consumer goods or services.
(b)To formulate action plans in connection
with the monitoring, prevention and
control of unfair trading practices and
monopolies which are likely to harm the
rights and interests of consumers, and
(c)To analyze and review the situation in respect to
the demand and
supply of consumer goods consumed within the
country.
(d)To make necessary arrangements for checking
any undesirable increase in prices by
producers, vendors or distributors of
consumer goods.
(e)To discourage unfair trading practices which are
likely to create shortages through artificial or
other improper means.
 The Government shall make necessary
arrangements in order to effectively implementS- 26
the provisions concerning the protection of the
C ORPORATE S OCIAL R ESPONSIBILITY IN
N EPAL  Nepal is one of the poorest countries in
the world, as 'over 30 percent of its
population live on less than US $18 per
person, per month, according to the
National Living Standards Survey 2015-
2016.
 About 75 percent of the population in rural
Nepal depend on subsistence farming.
Almost three-fourths of Nepalis still depend
on traditional household chores and 32
percent of the population is still
uneducated.
 Since the government of Nepal is finding it
difficult to get the country's macro- S- 27

economic situation right, small initiatives of

individuals, communities and corporations
 C ORPORATE S OCIAL R ESPONSIBILITY IN
 Nepal isNgoing
EPAL
through political, economic and social
transition and every sector is in a state of flux. The political
situation is grim and unpredictable. The issues of economic
and social development remain sidelined. In the given
condition, time has come for every responsible citizen to
contribute for the country‟s cause in their own ways. In this
process, the contribution of corporate houses can be immense
as they are regarded as the super citizens.
 The Corporate Sectors in Nepal can be champions in solving
social problems with their commitment towards the society,
expressed in terms of Corporate Social Responsibility (CSR),
integrated in their core programs.
 The need of the hour is that the Nepalese Corporations does S- 28

not involve itself only in seasonal charity activities, but designs

 C ORPORATE S OCIAL R ESPONSIBILITY IN
N EPAL
Focus of Social Responsibility

[towards stakeholders]

[Investors’ return]

S- 29
 I NSTITUTIONAL A RRANGEMENTS : NBI AND
CSR
 Building upon earlier efforts to promote responsible business by
various apex bodies of Nepali business associations, NBI
Business Code of Conduct Concepts launched in 2013 as a
voluntary step towards better business practices.
 “Nepal Responsible Business Summit 2014″ was held on 16-17
December 2014 in Kathmandu with an objective to bring
Nepal‟s business community together to discuss how to:
 Integrate responsible practices into their core business
 Build a brand around responsible practices
 Create operational efficiency through responsible practices
 Increase and improve stakeholder engagement
S- 30
 Effectively manage integrity and compliance
 I NSTITUTIONAL A RRANGEMENTS : NBI AND
CSR
 Each of the above objectives was discussed thoroughly in five separate
parallel tracks, consisting of three learning/ discussion sessions, with at
least one international best-practice example, alongside various local
Nepalese examples to set the context.
 Business leaders, civil society and academia came together to jointly
discuss how business ethics and responsible business practices can become
integral part of doing business in Nepal.
 Different models of business ethics were explored and their relevance for
Nepal were analyzed. Participants debated on concrete examples of how
companies are changing their business practices towards a more
sustainable and responsible private sector entity.
 Costs and benefits of such leadership decisions were discussed and
the potential for collective action amongst Nepalese business leaders S- 31
and leading businesses were explored.
 I NSTITUTIONAL A RRANGEMENTS : FNCCI &
CSR
 In a bill discussion meeting jointly organized by Ministry of
Industries and Federation of Nepalese Chamber of Commerce and
Industries (FNCCI) in July 2016, FNCCI President Pashupati
Murarka said, “If any industry spent the allocated amount in
environment
conservation, it has to be deducted as CSR”.

 In the bill, provision of at least 0.5 percent allocation of annual

total transaction for CSR has been proposed to the enterprises
that has more than Rs 150 million annual turnovers.

 The provision mentions that a detail report of the amount

allocated and the program selected by the industry for CSR has
S- 32
end of FY
.
to be submitted to the government within the three months from
the
 I NSTITUTIONAL A RRANGEMENTS : FNCCI &
CSR
 FNCCI has formed 15 different committees and 16 forums
to expedite its activities related to CSR.
 These committees include fair and exhibition, industry,
productivity and quality, information and communication
technology, cottage and small industry, customs and excise duty,
local economic development, women entrepreneurs development,
among others.
 The FNCCI forums assisting CSR enhancement programs in
Nepal include political coordination forum, Trade School Forum,
Cultural Development Forum, CSR Forum, and National Budget
Coordination and Monitoring Forum.
 FNCCI‟s understanding of CSR is, “CSR is sustainability, and
should
corporations‟ mission and aim as an institution, which S- 33

be part
then of the
shapes thebusiness model”.
definition This requires
and type a review of the
of CSR they
 NBI’S CSR P APER
 Corporate Social Responsibility (CSR) has become a buzz-word among
the bigger business houses in Nepal, like it has all over the world. The
term
„corporate‟ however, can be misleading since the concept, in fact, applies
to all business entities and entrepreneurs independent of their size. A
more
comprehensive term to describe the same concept would be
„Responsible Business Practices‟.
 Even though the bigger entities, particularly multinationals usually
develop more formal strategies and include them well in their PR
strategies, it is equally important for SMEs and even micro-businesses to
 For a small teashop owner in a village, the dissatisfaction of only
be responsive to their stakeholders‟ needs.
one customer might have catastrophic consequences if this customer
has a considerable influence within the limited market. Due to this
innate transparency and the direct impact of stakeholders, micro- S- 34
businesses
naturally have to take their responsibility towards their business
partners very seriously.
 NBI’S CSR P APER

 When a business grows into a small or medium size, it needs to

adapt its strategies as its impact and responsibility grows.

 As non-family members are employed, there will be new

expecta- tions towards the owner.

 As he or she will not directly oversee all activities any more he

or she will have to define standards of operations to ensure the
quality of services, products and marketing.

 As the environmental impact increases, he or she will have to

take measures to assure that it does not affect stakeholders
negatively. S- 35
 NBI’S CSR P APER

Theresponsibilitiesincrease as the numbers of

stakeholders and the scope of organizational impact
increases. However, whether we call the concept CSR
or „Responsible Business Practices‟ it applies to
businesses of all types and scales as all of them
depend on the goodwill of their environment.

S- 36
 CSR P ROBLEMS A ND P ROSPECTS I N
N EPAL
 The followings are some problems and the suggestions
to solve the drawbacks and weaknesses pertaining to
the concept of corporate social responsibility in
Nepal:
 CSR is more of just „need based‟ now in Nepal. An
obligation, beyond that required by the law and
economics, for a firm to pursue long-term goals
that are good for the society, has to be
promulgated.
 In our country, a company does not understand the
fair concept of social responsibility. Management of
S- 37
firm is engaged in maximum profit motive and is less
engaged to social interest. They are expected to
 Present legal acts are not sufficient to make
corporation socially responsible. Few laws related to
this area like Income Tax Act 2058, Industrial
Enterprises Act 2049, Labor Act 2049, Consumer
Protection Act 2054, Company Act 2063 etc, are
scattered. So they need to be unified and rearranged
as per the demand of our time.
 The commitment of business must be ethical while
contributing to economic development, including the
management of the quality life of the workers and
their families as well as that of the local community
and society at large.
 Concept of social responsibility should be placed in
S- 38
memorandum and articles of association of the
company. Company must place social audit in
END