Social Licence to Operate: What is it and why is it

important?

ANZBA Corporate Social Responsibility Conference

24 November 2014Vientiane, Lao PDR

Structure

1. What is a social license?

2. Why would a business want a social license?

3. How to obtain and keep one

4. Global guidance and tools

5. What does this all mean for businesses?

1. What is a social license to operate?

“A local community’s acceptance or approval of a company’s presence and activities”

A social license is not…

• Formal license issued by government

• A one-off sanctioning of activities; can be reversed and lost

• Approval for an organization to operate—instead activity-based

• Self-declared

Instead a social license is…

• Partnership between business, government, and communities

• Agreement that a company’s activity has a legitimate place in the community

• Dynamic and conditional arrangement that can be lost

2. Why would a business want to obtain a social license?

1. Development case: to promote social and economic development, ensure rights, or protect the environment

2. Business case: to protect investments and enhance business activities

Business case

• Lack of social license can have short- and long-term costs

• Outlays for community engagement can be investments to protect potential (and large) profits.

• Engagement with local communities can help develop closer ties, positive reputation, and business prospects

Obtaining social license from communities is increasingly seen as an important part of doing business

Social license in practice

• Once lost very difficult to regain; communities have long memories

• Negative impact of no social license…• Peruvian mining disruptions • Tata Motors in India• Nestle and Coca-Cola water use• Myanmar Myitsone dam • Shell natural gas in the Philippines

3. How can businesses obtain and keep a social license?

Principles of social license1. Legitimacy2. Trust3. Consent

Promoted through1. Comprehensive and early engagement2. Transparency and timely communication3. Community-driven local development4. Observed behavior

Tools for getting and keeping a social license

• Engagement strategies• EIAs/SIAs• Community development and investment• Global guidelines and toolkits

4. Global guidance and toolsGlobal guidance for good business practices is a growth industry (200+)

• UN Global Compact• Global Reporting Initiative• UN Guiding Principles on Business and Human

Rights• Equator Principles• IFC Performance Standards• ISO 26000• EITI• Voluntary principles on Security and Human

Rights• etc.,

Experiences with global tools

• Fragmented landscape

• Voluntary mechanisms lack enforcement/accountability

• Ensuring relevance and links for local businesses

But global tools have a role…

• Setting down good practices is important

• Guidance for behavior, esp. for committed companies

• Adherence can help with social license (quasi “credit rating” for social commitment)

• Reporting tools have clarified and standardized reporting

Social licensing in local context

• Concept of social license has not yet gained much traction in most developing country settings

• CSR of SMEs in developing countries is distinctive• Anchored more in philanthropy• Less formalized/institutionalized• Locally focused

5. What does this mean for businesses?

• The concept of partnership between business and communities can be applied in the context of local companies

• Global mechanisms can help even at the local level; only a starting point

Making global frameworks relevant to local context

• Stakeholder engagement can start with informal communication with people affected by businesses

• Work with companies to help develop simple templates for reporting and delivering information

Critical issues

Early and continuous engagement• Not a one-off process but requires systematic

engagement

Representation• Who represents the community? What happens

if community interests are not uniform? Who has the authorization to grant social license?

Real transparency• Communities need to be informed of details of

activities in a timely way and in understandable formats

Critical issues

Partnership and mutual benefit• Engage in community development strategies

and fair benefit sharing

Accountability and follow through• Feedback should be reflected in activities and

promises followed through

Making relevant to local context• Taking principles and tools and adapting them to

local context

Thank you.