Reference group refers to the group that become subjects of comparison to another group of individual.
Most people use this reference group to measure our own worth (for example, if you want to know whether you a bad or good guitar player, the reference group that you would most likely use would be famous band member) , and this might influence the formation of our identity in the future.
Nathan is faced with an ethical dilemma because he is concerned about the consequences of his actions. He is particularly how he will feel after engaging in the unethical act that the supervisor has asked