4.1 Social licence to operate

About 10 years ago, when the first edition of this handbook was being written, the mining industry was starting to embrace fully the concept of the 'social licence to operate', then defined simply as obtaining and maintaining broad community support and acceptance. As stated in Enduring value: the Australian minerals industry framework for sustainable development

Unless a company earns that licence, and maintains it on the basis of good performance on the ground, and community trust, there will undoubtedly be negative implications. Communities may seek to block project developments; employees may choose to work for a company that is a better corporate citizen: and projects may be subject to ongoing legal challenge, even after regulatory permits have been obtained, potentially halting project development. (MCA 2005)

This has not fundamentally changed. Ernst & Young, a global accounting firm, produces annual reports on the business risks facing mining and metals companies. Its 2014 report revealed that, for the period from 2008 to 2013, the social licence to operate maintained its position as the fourth highest risk among the Top 10' set of business risks each year (Ernst & Young 2013). What has changed is that what constitutes good company-community relations and social performance has widened to integrate considerations of human rights, the management of grievances and gender and diversity. In Australia, the expansion of mining operations during the mining boom brought more communities into contact with mining, not always with harmonious results, and there has been a major growth in fly-in, fly-out (FIFO) operations, with different implications for the management of community development issues. These newer elements of the social licence are discussed in this section

A more recent and detailed definition of the social licence explains that:

[T]he social license to operate is an expression of the quality of the relationship between a private sector project company and its neighbors. In terms of mining, this begins with first contact at the initiation of exploration and continues through the entire life of a project, which, if successful, includes mine construction, mine operation, closure, and increasingly into postclosure. (Thomson and Boutilier 2011:1,781)

Note that this definition focuses on the quality of the relationship and its endurance throughout the life of the mining project and beyond. It is a positive relationship, not merely the absence of conflict. It is also not primarily based on the purpose of managing risk. Discussion in this handbook concentrates on elaborating a positive attitude to community engagement and development, to the benefit of the business as well as to society in general and local communities in particular

Recent debate about the social licence to operate has centred on the difficulty that companies have in demonstrating to themselves and others that they have been 'granted' a social licence by the affected communities, the wider society, or both, and that the licence stays in force. This is largely because the existence of a social licence is often described by means of 'negative governance'

That is, it is easier to point to an absence of particular factors that could be considered necessary for a social licence rather than to know when all relevant factors are actively in place. By contrast, the absence of explicit forms of contestation can be interpreted as latent support in so far as communities have not offered any explicit point of objection that challenges the legitimacy of the so called 'social licence'. (Owen and Kemp 2013: 32)

A regulatory licence is tangible, can be proven to exist and will be held as long as any attached conditions are met. The intangible nature of the social licence makes it hard even to know exactly what conditions are attached, and those conditions may change from time to time. Indeed, there may well be a marked difference between the social licence to operate granted by the wider society and a social licence that is meaningful to the directly affected host community. The understandings of the social licence by corporate headquarters and local project management may differ in a similar fashion. A considerable literature has emerged debating these questions, some of which are far from resolved.

The main criticisms of the mining industry's social licence performance centre on too great a focus on corporate and head office requirements and interpretations of success for the purposes of sustainability reporting, to the detriment of tangible, local, on-the-ground relationship building. In addition, because of the dominance of risk management thinking in many corporations, community engagement activities are constrained in an attempt to lower community expectations by maintaining a low project profile—an approach that has been demonstrated on innumerable occasions to be erroneous (Owen and Kemp 2013). This head office predominance is sometimes accused of being 'greenwash', in that companies point to broad acceptance of a project by the wider society in a country as the proof of a social licence, despite localised grievances. Footnote 9 In recent times, some companies in Australia have realised that this approach can end up creating further setbacks due to localised community resistance, such as the rejection of a proposal to explore for coal in the Margaret River region of Western Australia in 2012. Footnote 10

In brief, the main features of the social licence to operate is that it:

  • should be earned by the corporation or project through its actions
  • should be 'granted' by the local community in preference or in addition to the national or wider community
  • must be constantly renewed through active, broad-based community engagement for the life of the mine, from exploration through closure
  • needs to be nurtured, not just paid attention to at times of crisis.

In other words, a social licence to operate rests upon a good community relations foundation, including both community engagement and development.


Footnote 9
See Thomson and Boutilier (2011) and Owen and Kemp (2013) for deeper discussion.

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Footnote 10
Media statement by WA Environment Minister on 7 February 2012 for Margaret River story.

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