Why a social licence pays off big- time

A community can be a powerful ally or formidable opponent, says James Ayliffe

THE concept of a social licence to operate is relatively new. The term was coined two decades ago by a mining entrepreneur concerned about hostility towards a mining venture from a local community and decided to do something about it. He realised that unless he tried to understand the issues from the community’s perspective his project might not reach its full potential. After listening to their concerns, the entrepreneur was able to make changes to the project that resulted in wide support. The lesson is that it is one thing to obtain tangible legal and political licences in the form of permits and zoning approvals from regulatory authorities, it is quite another to obtain a social licence to operate from the affected community. For one thing, the social licence to operate ( SLO) is intangible. There is no piece of paper to say what a corporation can or can’t do, as is the case with tangible endorsements that come with a permit or zoning approvals. The SLO has no physical condition. Rather, it is a state of being that comes from ongoing acceptance from all stakeholders of a corporation’s business undertakings. In this sense, stakeholders include employees as well as members of the community directly affected by the activities.

There would be many businesses and government departments that believe that having legal and political authority is all that matters. Why would anyone think you need to consult with others once you have the necessary government approvals to act? However, the reality is that a community that mistrusts a project can be a formidable opponent. The public might not win in the end, but they can add time and cost to the project and stunt professional reputations of executives.

A community that grants social licence on an ongoing basis can be an equally formidable ally. Smart companies are not waiting for external stakeholders to raise issues. They incorporate SLO into their risk management frameworks with social licence

A SOCIAL LICENCE ESTABLISHES LEGITIMACY, AND APPLIES TO EVERY ORGANISATION WHOSE OPERATIONS I MPACT HUMANS, WILDLIFE AND THE ENVIRONMENT

being measured in how often stakeholders are engaged with, and the frequency and way issues are resolved. This is proactive risk management. But social licence is also about something more basic — it’s doing the right thing. It’s about exercising equality and diversity in the workplace; making sure your supply chain does not include slave labour; about understanding lowest cost may not represent value for money; it’s about ensuring the environment is no worse off; it’s about ensuring compliance in an increasingly self- regulatory environment; and last but not least, it’s about legacy — thinking about the interests of future generations. A social licence establishes legitimacy, and applies to every organisation whose operations impact humans, wildlife and the environment.

For corporate and government executives who are seeking to minimise legal costs and compensation claims it is worth noting that all it takes as part of their review of risk is to ask, “are we engaging with the community in which we operate in such a way that we not only understand what is likely to cause them unease, but we will be able to address their concerns to our mutual benefit?” This then is the crux of the concept. In providing a social licence to operate, the stakeholders accept an organisation’s way of doing business and as such, provide valuable endorsement. An SLO enables an organisation to get on with business without wasting shareholder or public funds in fighting messy and unnecessary rearguard actions, and enables community involvement and support.