Applying for a licence

What does the social licence to operate mean to you?

If the social licence to operate is an unwritten contract, where does that leave communicators?

How can communications be part of this process and contribute to building a trustworthy and accountable organisation? We asked speakers at this year’s European Communication Summit for their takes on the relationship between business and society.

Businesses increasingly need not just a legal licence from a government, but activities need a social licence from society itself in order to remain legitimate. But a social licence is not a piece of paper, and nor is it a matter of philanthropy. In his new book, The Social Licence: How to keep your organization legitimate, John Morrison explains why the social licence is more than just corporate social responsibility: it goes to the heart of the social contract between an entity and society.

To quote one of the chapter titles of your new book, "what’s wrong with CSR?"

Corporate Social Responsibility (CSR) has been heavily criticised both by business itself as well as civil society organisations. For business, the biggest problem is that CSR can mean anything to anyone, and often means actions outside the core business model of the company. Surely it is better that a company contributes to society what it is good at – its core business. From the civil society perspective, CSR has been a profoundly business-centric approach to societal responsibilities: business tends to see itself at the centre of spheres of influence and decides itself how and where to engage. My definition of social licence responds to both these critiques – it builds on 300 years of social contract thinking to propose that business needs to understand its role in society not in its own terms, but in relation to the pre-existing social contract between communities and government. Therefore to enjoy a strong social licence for its activities, business (or any other type of organisation) needs to gain the legitimacy, trust and consent of communities.

Isn't a legal licence enough?

There was a time when all a business needed for its activities was its legal licence to trade, or for particular licences for larger projects. This was often backed by political licence – winning the consent of a president in a developing country for example. Now almost everywhere in the world this is no longer enough. In addition to legal and political licences, business needs a social licence from the community upon which its activities will impact.

"When it is working well, the social licence is often invisible."

A social licence is not a piece of paper, it cannot be self-proclaimed by a business for any activity, rather it needs to be given by the community itself on an ongoing basis. When it is working well, the social licence is often invisible. It is only when it is lost that its existence (or absence) becomes fully apparent.

The concept of social licence seems to suggest that companies are Goliaths that need to be shown how to behave by the plucky Davids of various stakeholder groups. Is this imbalance of power really such a one-way street?

Yes, it is can often be the case that the companies are better resourced than local communities, in particular if the communities are already vulnerable or marginalised due to the lack of infrastructure, employment or other resources. However, my book does not assume this is always the case. In fact, the chapter on consent, which describes the importance of Free, Prior and Informed Consent (FPIC) of indigenous peoples challenges NGOs who try and take this term too widely. FPIC should not be extended to all communities, as for well-resourced communities this then becomes NIMBY-ism. No one wants a world where middle-class communities can thwart every attempt by central government to build infrastructure nearby which would serve the greater interests of a society (in particular the poor).

Some licences have to be applied for on an ongoing basis: the social licence is no exception. A major change in an organisation redraws the boundaries and the standing of the organisation within society, and so it makes sense that the licence to operate must be re-examined, as Nokia's Minna Aila knows following Nokia’s recent acquisition of Alcatel-Lucent.

How do communications help a post-merger business define its purpose?

When two or more company cultures come together, the new entity needs a clear vision and purpose, but also a set of joint values and a common narrative. Communications is the glue that keeps business, brand, HR, strategy, corporate responsibility and other professionals together and aligned when the purpose is defined. Communicators are the multimedia artists of corporations who can provide the internal glue, but they can also be the interpreter between the company and the surrounding society, with its many different stakeholder groups, with their different needs and expectations. The company’s purpose needs to reflect the world in which it operates and preferably be a part of a solution to some of the problems humankind is facing. Communicators can translate that purpose into something that touches people on many different levels, like a good work of art.

Nokia famously sold its iconic mobile devices division to Microsoft: in the wake of such a dramatic change that redefines a company, did Nokia have to redefine its social licence to operate?

This change took place almost two years ago. It turned the company from a customer-oriented phone designer into a B2B telecommunications network company. Recently Nokia acquired Alcatel-Lucent, which was again a major change. Now the company is a global leader in the technologies that connect people and things. Social licence to operate is not something you can gain and retain. It is a dynamic concept which is constantly redefined in a company’s relationship with its’ stakeholders. A social licence to operate is not something the company itself can define, but rather is granted to it by the surrounding society if the company is deemed worthy of it. If you fail in the test of trust, the licence can be lost in minutes. If the surrounding society shares our vision of a programmable world where technology is at the service of humankind, and believes that Nokia can innovate and make it happen, it has granted us our licence to operate.

How do you engage stakeholders in the search for the licence to operate?

This is an ongoing dialogue where all the means available should be used. Every connection between the company and its stakeholders is an opportunity to strengthen the social licence to operate. In my mind a brand is defined as a place in the customers’ brain and heart. In a similar manner, a social licence to operate must be granted from both the stakeholder’s brain and heart. This means that engagement with people must take place on both rational and emotional level.

As a major player in the heavily-regulated information technology sectors, what role does regulation and corporate governance play in the social licence to operate?

If you think of the social licence to operate as a dynamic concept, you can imagine it as a staircase. At the bottom, the company is rejected and the licence is withdrawn. Regulatory licences and proper corporate governance give the company legitimacy, which is the first step to approval and towards the social licence. When the company starts gaining acceptance through its actions, it is yet another step closer to the licence. Mutual trust still needs to be built before the stakeholders can psychologically identify themselves with the company and become its advocates or ambassadors. It is quite common that different stakeholders can be at different steps at different times, and can move up and down the staircase. When a company has most of its stakeholders at the top of the staircase, the social licence to operate exists. Complying with laws and regulations is only the first step.

Perhaps the most important impact that the social licence to operate has is in restoring society’s confidence in business. The global financial crisis, which saw entire economies teetering on the bridge of bankruptcy, untold destruction of personal wealth and unemployment levels at historically high records called into question the right of business to operate in such an apparently uncontrolled and unregulated manner. Nanne Bos of ING understands how the licence to operate protects not just a company’s but an entire industry’s reputation.

In 2008-2009, as a consequence of the financial crisis, ING Group, like other major financial institutions in Europe, received state aid. Does this fact oblige ING and financial institutions like it to think more carefully about its ties to society?

Every institution, public and private alike, has to constantly analyse its societal role. If not, you lose connection with your key audience and clients. During the crisis it became clear that our sector had become disconnected from society and had to rethink its relationship to society at large. ING found itself at the epicentre of the financial crisis. In 2008, ING took a bailout of 10 billion euros from the Dutch government and in 2009 a restructuring programme that met the European Commission’s requirements was agreed. Since then we conducted about 50 divestments and in 2009, we started repaying the Dutch state and made the final payment on 7 November 2014.

"Every institution, public and private alike, has to constantly analyse its societal role."

As a result of the restructuring ING no longer offers insurance and investment services and solely operates as a bank. The crisis forced us to rethink who we were, what our role for our customers and society at large is and how we engage with our stakeholders.

Did the economic crisis help the financial sector’s progress in terms of winning its social licence to operate?

I think that in a longer perspective, the crisis has helped the financial sector to progress substantially in its way it interacts with society. A famous American psychologist once said that your finest moments are likely to occur when you are feeling deeply uncomfortable. For it is in such moments, that people are likely to change their routines and start searching for different ways. I guess that this applies to ING as well. The crisis has helped us to refocus on the customers’ needs. And it made ING stronger, simpler and more sustainable. But making the necessary changes was not an easy process. Especially when you are in the middle of it – reputation management can be pretty hectic.

As head of global brand management at ING, and before that being responsible for brand and reputation at the National-Nederlanden, what would you say is the relationship between your brand and reputation?

Although the two cannot be separated, brand management is more about making a promise and reputation management about living up to promise. Both must be deeply rooted in your identity. In a context where customer confidence is low, it’s not just making a promise that separates one brand from another. It is about being clear what you stand for as an organisation and consistently delivering on it. This applies to all organisations – and certainly for banks. For most consumers it is no longer what you buy, but what you buy into.

To what extent does ING’s brand play a role in helping the organisation to engage anew with stakeholders?

One of the biggest myths about organisational identity is that it cannot change or that it should not change. The convictions of the members of an organisation about what the organisation is and what it stands for is always subject to change. It may not always on an individual level, but certainly on a collective level, both amongst employees and external stakeholders. So in dealing with the necessary change within ING, we went back to our roots and focused on our organisational identity and purpose. This was not an easy process but worth the effort as a clear identity has the power to engage all stakeholders, including customers and employees. We used our brand as a point of reference that connects, engages and brings meaning.


John Morrison

John Morrison is executive director of the Institute for Human Rights and Business. He has advised the Danish, Swedish and British during respective presidencies, as well as chairing the jury of the Dutch Government’s human rights prize in 2013. Before joining IHRB as its founding director in 2009, John directed the Business Leaders Initiative on Human Rights 2003-9, was head of global campaigns and community affairs for The Body Shop International and also worked for a number of civil society organizations.

Minna Aila

Minna Aila is currently vice president, corporate affairs, at Nokia, responsible for communications, government relations and corporate responsibility. She has held senior leadership positions in two other listed global companies, Outotec and Elcoteq. She has also worked for the financial sector, as well as served the European Commission for 10 years. She is also the chairman of the board of FIBS Corporate Responsibility Network.

Nanne Bos

Nanne Bos leads the Global Brand Management team at ING Group in Amsterdam. In that position, he is responsible for defining and executing the global strategy and the growth of the ING brand which stretches across 40 countries. This article is based A phenomenological study into the psychodynamic effects of executive loneliness, solitude and isolation that was part of his Master’s Degree programme in Change at INSEAD. You can reach him at [email protected].