The Very Seductive Social License to Operate – a Reality Check

OPINION: The social license to operate is a seductive concept, as it speaks to the business case for community relations, a traditionally ‘soft’ part of corporate life, according to Dr Leeora Black founder and managing director of the Australian Centre for Corporate Social Responsibility.

The social license concept promises that companies can win community acceptance or approval, minimise risk and obtain access to resources such as land or a good reputation. All they need to do is act like good corporate citizens.

Sounds easy, right?

Let’s take a reality check. The concept has become so popular it may be in danger of becoming the new fig leaf for companies who imagine they can buy their way to community acceptance, or that a few dollars invested in community projects will balance or offset the negative impacts of their operations. It won’t.

Queensland scholars Owens and Kemp# suggest the term ‘social license’ can actually hinder
community-corporate relationships because it does not show a pathway for sustainable community development and focuses too much on risk instead of collaboration.

At ACCSR we have been working with international colleagues for several years to define and operationalise the social license concept in a way that allows companies and communities to genuinely work together for sustainable development.

We have worked with over 40 communities and dozens of companies in several countries to test and refine our ideas and provide practical and effective strategies for community relations. Here’s what we’ve learned so far.

1. The social license is a political idea. If all politics is about the distribution of benefits and impacts, then the social license is inherently political. It is about the negotiation of equitable benefits and impacts of a company in relation to its stakeholders, over the near and longer term. A social license can range from informal, like an implicit social contract, to formal, like a community benefit agreement.
2. The social license is not a synonym for acts of philanthropy or community investment, which on their own do not guarantee a social license.
3. Negotiation of benefits and impacts entails acknowledging, respecting and sometimes ceding power to stakeholders.
4. Stakeholders and communities are self-defining. They define themselves in relation to the impacts and benefits of a company and not in relation to a physical distance.
5. A company that wants to restore, earn, maintain or improve its social license has to first understand the socio-political construction, or map, of its communities. Who are the stakeholders? What are their interests and needs? How do these cause divisions in communities and how, and on what issues, can stakeholders and companies work together? These fundamental questions need answers to be able to develop a meaningful social license to operate.
6. Effective grievance mechanisms are essential for the effective operation of a social license. Grievance mechanisms enable imbalances in benefits and impacts to be redressed as they occur. They help prevent the social license from being eroded.
7. The social license is dynamic. It changes as communities needs and expectations change, and in response to company behaviour.
8. Because it is dynamic, the social license needs to be continuously monitored and when necessary adapted. The social license takes account of the history of the community’s internal dynamics and community-company relations. The more complexity encountered, the higher the need for empirical, detailed and careful measurement and negotiation of the social license. What you don’t know can hurt you.
9. A community benefit agreement can under certain conditions be a very good approximation for a social license, but only if it has been based on inclusive, stakeholder-defined processes and is elastic enough to allow for changing community dynamics and needs.
10. The social license to operate is measurable.
11. There is no substitute for direct stakeholder engagement in the measurement of the social license. Companies need to talk directly to stakeholders to obtain robust data. Stakeholders can sometimes talk more freely with independent trustworthy intermediaries such as qualified social scientists. This means research.
12. Stakeholder fatigue is only an issue when stakeholders have continually been disappointed by a failure to act on outcomes of stakeholder engagement.
13. The foundation of the social license is trust. Trust is earned through consistent trustworthy behaviour over a long time.

Companies use the language of social license very freely. It’s a seductive idea, because it bolsters the legitimacy of companies when a government license does not of itself bring peace and prosperity. A real social license takes hard work and willingness to collaborate with stakeholders.

ACCSR is holding a special one-day Master Class on the Social License to Operate in Melbourne on 23rd November 2012, with Senior International Associate Dr Robert Boutilier, a pioneer in the measurement and management of the social license to operate. 

About the author: Dr Leeora Black, Ph.D, is founder and managing director of the Australian Centre for Corporate Social Responsibility and an honorary visitor to the La Trobe University Graduate School of Management.