Much to the embarrassment of the man who coined the term, “social licence to operate” (SLO) has become a buzzword in certain circles.
At a workshop on the social licence last year, Jim Cooney apologised for inflicting the term on the world. Cooney coined the term in 1997 when he was vice president of external affairs at Vancouver-based gold miner Placer Dome, he used the phrase in a meeting with World Bank officials and they then used it at a conference on mining and communities.
From there it spread throughout the mining industry. Cooney’s original intention was simply to draw the attention of mining executives to the need for community approval for mining projects over and above all the legal permits and licences. However, it wasn’t long before opponents of all sorts of extractive industry, energy, and infrastructure projects appropriated the term to add an extra air of legitimacy to their opposition. That brought the social licence concept firmly into the realm of communications, political controversies and issues management.
In the case of successful opposition to a proposed bitumen pipeline from Alberta’s oil sands to Canada’s West Coast, opponents claimed that the legal licensing process was biased and that therefore the social licence was all that mattered.
Several Canadian lawyers reacted with horror, depicting the social licence as a self-granted veto and a challenge to the rule of law. In the end, the legal licensing process imposed hundreds of conditions on the project, some of which required the proponent to obtain the approval (i.e., social licence) of communities and other stakeholders on the pipeline’s path. In other words, the legal licensing process salvaged its legitimacy by absorbing the social licence into the legal regulations.
Social versus legal
A similar merging of the social with the legal is gaining momentum more broadly as resource companies learn the art of negotiating community benefit agreements and innovative community-company partnership arrangements. Governments, for their part, are decreasingly likely to back projects that have vocal opposition.
Therefore, it becomes the proponent’s job to work out an agreement with stakeholders before seeking a legal licence.
As the term ‘social licence’ diffused to industries like energy, infrastructure, utilities and agriculture, it became more associated with the much older concept of the social contract. Eighteenth century philosophers like Hobbes and Rousseau thought of the social contract as a de facto pact between individual citizens and the state.
The social licence, however, assumes the citizens play their part in governance more actively by forming organisations to express their approval or disapproval. Moreover, they do not assent to an abstract contract, but rather approve or disapprove of a specific organisation’s activities.
What makes it similar to the social contract is that even government and non-government organisations need a social licence for their various activities. Therefore, when all the social licences of all the organisations are piled on top of one another, the cumulative result can be described as an ongoing social contract negotiation.
The social licence’s implication that stakeholders are powerful irritates diverse groups. Some CEOs talking to investors would rather that the stakeholders be viewed as supplicants who can be judiciously appeased. At the other end of the socio-political spectrum, activists have objections too.
They would often rather that stakeholders be viewed as valiant little Davids struggling against the corporate Goliaths. The hint that stakeholders can sometimes bully companies is seen as politically incorrect. Similarly, a sub-set of academics studying corporate social responsibility and business ethics find it very messy to have to work through the implication that stakeholders, having power, must also be examined and held accountable for their social responsibilities. It is much easier to think of corporations as having all the responsibilities and stakeholders as having all the rights.
“The social licence’s implication that stakeholders are powerful irritates diverse groups.”
The social licence is one of many concepts touching on the relationship between companies and their stakeholders, or more generally, business and society. The more familiar concepts include corporate social responsibility, sustainability, human rights in the supply chain, gender equity, and free, prior and informed consent.
The social licence is distinct in its emphasis on stakeholders as active agents who have the power to influence what companies do. A withdrawn social licence usually means the company loses access to vital resources like water, land, employees, customers, financing, or legal permits. Even if the company only experiences higher costs in accessing resources, the withdrawal of the social licence puts the company at a competitive disadvantage.
Elaboration into a management tool
As with every buzzword, the social licence has attracted its share of consultants offering to help companies maintain or improve their social licences. Some, however, were acquaintances of Jim Cooney and began converting it from a metaphor to a management tool even before the phrase came into widespread use. Based on fieldwork with communities affected by mining, Susan Joyce and Ian Thomson identified three levels of the social licence:
• When a project lacks what stakeholders call ‘legitimacy’, it loses its social licence.
• If it has legitimacy but not ‘credibility’, the project’s social licence is at the level of tolerance or tentative acceptance.
• If credibility is gained, the social licence rises to the third level, which is approval or active support.
• A fourth level was proposed later. Once the project gains institutionalised trust, the social licence can reach a level called psychological identification. Psychological identification is more of a community level phenomenon in which a whole network of stakeholders absorbs the project or activity into its collective identity. Examples include Silicon Valley’s identification with the computer industry and Hollywood’s identification with the film industry.
The four-level model also formed the conceptual basis for measures of the social licence that have validated on over 25 mining projects on four continents in nine languages. The measures focus on stakeholders’ perceptions of their relationship with the project proponent.
The thinking was that the relationship would be sensitive to the balance of positive and negative impacts as weighted for importance by the stakeholders themselves. This differs from the unwieldy alternative approach of trying, often vainly, to identify and measure impacts directly and then guess at, or assume, what importance those might have for stakeholders relative to the benefits.
A focus on relationship perceptions also has the advantage of facilitating comparisons across time and cultures. Relationships are a relatively universal aspect of organisational activities while impacts tend to be much more situation specific.
Applying analysis, winning support
Project managers who need a social licence often get stuck on the question of whose social licence counts. Stakeholders disagree among themselves about what level of approval or disapproval to grant a project. Is the overall social licence for the project determined by a simple majority or should the opinions of those with more power count more? Sometimes stakeholders even argue that the opinions of those with less power should count more because they are more vulnerable.
The problem can become an unsolvable puzzle when managers assume it is up to them to decide whose opinion counts more. The conundrum disappears when opinion weighting is converted into an empirical question. In the final analysis, the project either goes ahead or not based on the political dynamics in the stakeholder network. The question then becomes one of understanding the politics as they actually are. The manager needs to know the coalitions, cohesions, and conflicts in the socio-political landscape. Stakeholder network analysis gives exactly that information.
“Project managers who need a social licence often get stuck on the question of whose social licence counts.”
One excellent way to get information on stakeholder networks is through interviews with stakeholders about their network connections. When the network has been graphed, the socio-political dynamics become visible. For example, in many controversies there is a cohesive minority of project opponents amidst a diffuse, unorganised majority of supporters. In these cases, the minority typically has more political clout. A viable strategy for raising the level of social licence might involve initiatives to make the supporters as cohesive as the opponents. If there is a group of ambivalent stakeholders being courted by the opponents, initiatives might be launched to win their support.
The development of a universally applicable measure the level of social licence and the use of networks to identify gradations of stakeholder influence, created a bridge to the next stage of conceptualisation known as modeling. University based projects in the United States and Japan have sought to model the political dynamics surrounding resource projects with the hope of predicting which stakeholder engagement strategies would do the most to raise the level of social licence either in the short-term or the long-term.
Some of these simulations have confirmed practitioners’ views that it is sometimes necessary to provoke a short-term decline in the social licence in order to enjoy a longer term rise. For example, when influential stakeholders engage in extortion or intimidation, principled resistance to it will produce a short term decline in the social licence. However, the benefit accrues in strengthened perceptions of credibility, which are necessary for the transition from the level of tolerance to the level of support.
Social licence communications and issues management
Communications play a central role in raising the level of social licence because support or opposition rides on the ‘stakes’ of stakeholders and the stakes are the core of controversial issues. Indeed, some argue that getting a social licence is an exercise in issues management, but with the focus on communications and initiatives with stakeholder groups rather than the general public.
The development of perceptions of legitimacy, credibility and trust generally goes more smoothly when companies listen to their stakeholders, participate in respectful dialogues, and create initiatives that involve working together those stakeholders. This collaborative approach to gaining a social licence is quite the opposite of a pseudo-philanthropic approach of ‘objectively’ assessing what stakeholders need and giving it to them as efficiently as possible, where ‘efficiently’ means without a lot of meetings or discussions with stakeholders.
Practical experience and several academic studies show that when they feel disrespected or ignored, stakeholders will not immediately complain about the process. Rather, they will often cite environmental fears as the basis for their objections. Then project managers are surprised when actions to reduce environmental risk do not reduce opposition to the project. These recurring miscommunications only serve to reinforce the wisdom of measuring the social licence on the basis of stakeholders’ perceptions of the relationship rather than objective assessments of the impacts.
The primacy of relationships does not relegate impacts to an afterthought. Impacts, however, can be seen as unjust or tolerable depending on the quality of the relationship in which they occur. For example, increased traffic caused by a project can be seen as bothersome imposition when stakeholders have had no contact with the project managers.
However, when stakeholders and managers have collaboratively planned for it beforehand and considered ways to possibly it into a benefit, then the same traffic can be viewed less negatively, or even positively. What seems to matter most in relationships between project proponents and stakeholder organisations is the sense of control and fairness that results. Collaboration increases the sense of control and an open, participatory decision process increases the sense of fairness. Trusting relationships are high on both these factors.
Inspiring assent to the rule of law
It is perhaps no accident that the social licence concept originated in the mining industry. Mining is at the forefront of bringing the global economy to remote regions of the world where national governments have only a faint presence and where most of the important decisions are made locally. In this context, one cannot rely on the rule of law and the legal licence. Socio-economic order has to be negotiated and customised to local conditions.
Something similar may be happening globally. It has been said that the world is entering an inter-regnum between the hegemony of the United States and the hegemony of China. During such gap periods, it is riskier to assume that legal arrangements from the fading hegemony will be enough to inspire stakeholder assent and acquiescence. As the global rule of law goes into a partial eclipse, the need to supplement it with a social licence only intensifies.
- Jim Cooney coined the term “social licence to operate” in 1997 when he was vice president of external affairs at Vancouver-based gold miner Placer Dome in order to underline the need for community approval for mining projects over and above legal permits and licences.
- The term was quickly appropriated by opponents of extractive industry, energy, and infrastructure projects, bringing the social licence concept into the realm of communications and issues management.
- The term also became associated with the eighteenth century concept of the social contract between individual citizens and the state. In this way, the social licence is one of many concepts touching on the relationship between companies and their stakeholders, or more generally, business and society.
- Today, governments are less likely to back unpopular projects, therefore prior agreement with stakeholders is necessary.
- There are conflicting perspectives on the role of stakeholder and the role of companies: social licence to operate is distinct by emphasising the stakeholder as an active participant.