Part of it feels like he's paying penance for some of the wild shyt he did in the past too.
The way the Twylek chick talks about him going
back in the day, in the Bill Burr episode shows how far down the path he went.
I don't think it's a coincidence that he and IG-88 - a remorseless killing machine - were after the same bounty in the first episode. Mando had to make the choice between killing Grogu because it was the mission and essentially becoming no better than a droid himself, or realizing the kid was in pretty much the same position as he was before the Mandalorian saved him.
This show is ridiculously close to 'Lone Wolf and Cub' - from the philosophy on down.