Social License to Operate

Definition

The social license to operate (SLO) is an informal, unwritten social contract that represents a community's acceptance or approval of a company's activities. It goes beyond legal or regulatory requirements and reflects the ongoing acceptance and trust of local stakeholders and the broader public.

5 Must Know Facts For Your Next Test

1. The social license to operate is essential for companies operating in sensitive industries or local communities, as it can impact a company's ability to obtain permits, access resources, and maintain its 'social legitimacy'.
2. Losing the social license to operate can lead to project delays, increased operational costs, reputational damage, and even the inability to operate in a particular location.
3. Maintaining the social license to operate requires ongoing engagement, transparency, and responsiveness to the concerns of local communities and other stakeholders.
4. Companies can proactively build and maintain their social license by implementing effective stakeholder engagement strategies, addressing social and environmental impacts, and demonstrating a genuine commitment to sustainable and ethical practices.
5. The social license to operate is particularly important in industries such as mining, oil and gas, forestry, and infrastructure development, where the potential for social and environmental impacts is high.

Review Questions

• Explain how the social license to operate is distinct from legal or regulatory requirements for businesses.
  • The social license to operate goes beyond legal or regulatory requirements and reflects the ongoing acceptance and trust of local stakeholders and the broader public. While legal and regulatory compliance is necessary, the social license to operate represents an informal, unwritten social contract that requires companies to consider the social, environmental, and economic impacts of their operations and integrate these concerns into their decision-making and practices. Maintaining the social license to operate requires ongoing engagement, transparency, and responsiveness to the concerns of local communities and other stakeholders, which can be essential for a company's ability to obtain permits, access resources, and maintain its 'social legitimacy'.
• Describe the potential consequences for a company that loses its social license to operate.
  • Losing the social license to operate can have significant consequences for a company, including project delays, increased operational costs, reputational damage, and even the inability to operate in a particular location. When a company fails to address the concerns of local communities and other stakeholders, it can lead to protests, legal challenges, and a loss of public trust and support. This can ultimately undermine the company's ability to obtain necessary permits and access critical resources, jeopardizing its long-term viability and success. Maintaining the social license to operate is therefore essential for companies operating in sensitive industries or local communities, as it can have a direct impact on their ability to operate and succeed.
• Analyze the key strategies companies can employ to build and maintain their social license to operate.
  • To build and maintain their social license to operate, companies must proactively engage with local communities and other stakeholders, address social and environmental impacts, and demonstrate a genuine commitment to sustainable and ethical practices. This includes implementing effective stakeholder engagement strategies, such as regular consultations, open communication, and collaborative problem-solving. Companies must also conduct thorough social impact assessments to identify and mitigate potential negative consequences of their operations, and integrate these findings into their decision-making and operational practices. Additionally, companies must go beyond legal and regulatory compliance by adopting robust corporate social responsibility (CSR) policies and programs that address the broader social, environmental, and economic impacts of their activities. By taking these proactive steps, companies can build and maintain the trust and acceptance of local communities and the broader public, which is essential for their long-term success and sustainability.

Related terms

Corporate Social Responsibility (CSR):

A business approach that considers the social, environmental, and economic impacts of a company's operations and integrates these concerns into the company's values, culture, decision-making, and strategy.

Stakeholder Engagement: The process of involving individuals, communities, or organizations who have a 'stake' or interest in the outcomes of a project or business activity.

Social Impact Assessment: The process of identifying and evaluating the potential social consequences of a proposed project or policy, both positive and negative, in order to inform decision-making.