Social licence to operate and impact assessment

Abstract

This article reviews historical and recent developments in the understanding and employment of ‘social licence to operate’ (SLO), particularly as it relates to impact assessment (IA). It canvasses the ways in which concerns about SLO are beginning to overlap with or be incorporated into IA processes. In so doing, the article has two aims. First, it establishes a research agenda for SLO in IA by posing a series of timely, critical questions to assist IA practitioners grappling with increased proponent and community concerns about an SLO. Second, the article reviews the contributions to this Special Issue of Impact Assessment and Project Appraisal and the ways in which they mark an important touchstone from which the IA profession may consider, more formally, the growing implications of SLO for the field. In particular, a future research agenda for SLO and IA should consider: measuring and monitoring SLO, tensions and synergies between SLO and IA, potential of SLO to improve stakeholder engagement and proponent accountability and the possible role of SLO in regulation linked to IA.

Keywords::

• social licence to operate
• impact assessment
• mining
• extractives

Since its invocation in the late 1990s, the concept of a ‘social licence to operate’ (SLO) has become ubiquitous in the global mining and extractives industry. Proponent companies, community activists and governments alike appropriate its evocative language to support their particular values and objectives (Lacey et al. 2012). While an SLO remains metaphorical (Bice 2014), its entry into regular industry parlance has seen it take on rhetorical and pragmatic influence which stretches beyond informal agreement (see, for example, Prno & Slocombe 2012; Parsons & Moffat 2014a). Indeed, anecdotal evidence from the field suggests that impact assessment (IA) practitioners are increasingly being asked to assist project proponents to measure and monitor their SLO, although the relative newness of the concept means that research has yet fully to reflect this trend (Prno & Slocombe 2012). Reports also indicate that community members regularly assert that an SLO may be withheld to describe the potential backlash on proponents whose negative impacts are not prevented or mitigated (see, for example, ACCSR 2011; Kuch et al. 2013). Meanwhile, governments are beginning to use a once purely informal concept in formal instruments (see, for example, Gunningham et al. 2004; Parker 2007; COAG Energy Council 2013).

Despite its popular usage the SLO's definition and utility remain debatable (Owen & Kemp 2012). Most commonly, the SLO is understood to refer to ‘the ongoing acceptance and approval of a [project] by local community members and other stakeholders that can affect its profitability’ (Moffat & Zhang 2014). The substance of SLO requirements run the gamut from worker safety to cultural sensitivity, and the degree of SLO proffered by a community may range from withheld/withdrawn through to assimilation of a firm within the community fabric (Thomson & Boutilier 2011). While certain perspectives suggest that the SLO is purely a ‘descriptor of the state of the relationship between a proponent and the community in which the proponent is operating’ (Franks & Cohen 2011), emerging research (see, for example, Lacey et al. 2012; Lacey & Lamont, 2013; Prno 2013) and evidence from the general discourse regarding resource development suggest that proponents (e.g. Bice 2014), community stakeholders (e.g. Lytham St Anne's Express 2014) and governments (e.g. DIP 2010) are more strongly emphasising the power, role and expectations of the ‘licence’. This has led to scholarly investigations about the processes necessary for ‘social licensing’ (Moffat & Zhang 2014), understanding the SLO as a form of social contract (Lacey & Lamont 2013), defining the licensing criteria and brokers (Bice 2014), measuring the degree of SLO held (Thomson & Boutilier 2011) and the related governance mechanisms necessary to facilitate and maintain an SLO once earned (Prno & Slocombe 2012).

In light of this recent history, this article has two key aims. First, we explore the nascent SLO literature to set out the core intersections between SLO and IA. In so doing, we aim to identify key questions which can drive a new research agenda into SLO and IA. Second, the article serves as an introduction to this Special Issue on SLO and IA, setting the context for and briefly reviewing the research contributions which are beginning to address the research agenda outlined.

The article proceeds by first reviewing the emerging interest in SLO among the IA community. We then interrogate the emergence of SLO, especially within the mining and extractives industry, to delineate key factors influencing the uptake and spread of SLO by mineral developers, communities and governments. Implications of these developments for IA are explored, and questions to support a research agenda are identified. We then summarise the articles within the Special Issue to provide an overview of early responses to the research questions posed. We conclude with a brief discussion of promising avenues for future research into SLO and IA.

Emerging intersections between SLO and IA

The contemporary and creeping implications of SLO for IA were strongly apparent at the 2013 International Association for Impact Assessment (IAIA) Annual Conference. Prior to the conference's official opening, we participated in a workshop of ‘SLO researchers’, attended by colleagues from across the globe – North America, Australia, Mexico, Europe, South America and Africa – with all reporting substantive and spreading interest in SLO by proponents requesting IAs. At the conference itself, a theme session on ‘Social licence to operate: the next generation of measuring and monitoring’ attracted so many papers as to require two sessions, both of which drew standing-room-only audiences.1 This is not to mention other presentations in the program which addressed the subject from other perspectives. And again at the recent IAIA14, SLO proved to be a hot topic of conversation, with attendees exploring its nascent application in IA.2

Thus, burgeoning uses of SLO in IA, the buzz amongst practitioners, and our own research into SLO in the mining and extractive industries sparked this Special Issue of Impact Assessment and Project Appraisal (IAPA). The articles within demonstrate clearly that SLO is of increasing importance to proponents, communities and governments. It is vital that the IA community purposefully considers the implications of SLO and potential consequences for IA practice – in its many guises. This Special Issue marks the first time in which explicit focus has been given to the emerging relationship between SLO and IA. It therefore provides a touchstone for the IA field to consider the issues and emergent research questions detailed in the following sections.

The licence every proponent wants

Since the former Placer Dome executive Jim Cooney introduced the notion of an SLO to the mining and extractives industry in 1997 (Thomson & Boutilier 2011), the concept has become pervasive, appearing on corporate websites, touted by consultants and written into sustainability reports (Bice 2014). Indeed, and although much of this issue remains focused on examples from the mining and extractive industries, SLO is beginning to be adopted much more widely. Major corporations such as Motorola, Nestlé and Unilever all consider the ways in which their business decisions may affect their SLO (Wilburn & Wilburn 2011). The concept, it therefore appears, is one which is likely not only to endure but to spread. Yet will SLO provide an effective vehicle for identifying and addressing social and environmental impacts? And should it?

Several factors may explain the rapidity and extent to which SLO has been embraced by corporations and related parties. First, the concept was introduced at a time when the mining and extractives industry, worldwide, was suffering reputational damage. Events such as that of Ok Tedi and Brent Spar publicised environmental and social harm from extractive related activities. Meanwhile, distal communities became able to voice concerns through emerging communication technologies. The notion of SLO, therefore, crystallised the industry's budding concern with broader social and environmental issues. It provided a rhetoric around which the industry could coalesce and seek legitimacy (Aguilera et al. 2007). The licensing language characterised that concern as formal and as a demonstration that companies were willing to ‘go beyond compliance’ to mitigate social and environmental harm or even to effect benefits (Gunningham et al. 2004).

Second, the SLO concept leverages a pseudo-regulatory discourse with which the mining and extractives industry is historically comfortable (Owen & Kemp 2012). Related concepts of sustainable development, corporate citizenship or corporate social responsibility (CSR) – all of which have had considerable lives of their own within the industry – are seen as ‘softer’ (Bice 2012), more aligned with community relations. This is compared with a tendency to see SLO as a form of risk management (Prno & Slocombe 2012) or as a concept more readily related to technical design (Franks & Cohen 2011) or complementary to the financial goals of the company (Lacey et al. 2012). Thus, SLO ‘speaks’ to industry in a language with which it is comfortable and which may influence areas of its business on which it has more traditionally focused.

Third, and perhaps controversially, an SLO may provide companies with a ‘grey’ space in which to assert compliance or legitimacy without the formalised boundaries or enforceability of regulation (Owen & Kemp 2012; Parsons & Moffat 2014a). Similar arguments abound in relation to CSR, where studies have demonstrated that ‘informal’ regulation often garners industry support because it offers legitimacy without enforceable compliance hurdles (Vogel 2008). Thus, the SLO offers an appealing middle ground through which project proponents can attend to – or make claims to attend to – stakeholders' concerns and leverage reputational gains (Wilburn & Wilburn 2011) without a minimum-standard regulatory compliance burden or official auditing of activities to gain or maintain the SLO. Related to this, the current situation allows proponents to define (or leave vague) the SLO licensing criteria and brokers.

Finally, an SLO has gained traction, in part, because it is also a concept which – while remaining poorly, technically defined – is generally easily and widely understood by community stakeholders. As the professional practice paper and case study articles in this Special Issue demonstrate, it is not uncommon for community members – such as their corporate counterparts – to discuss the behaviours and rights of a project proponent in terms of an SLO. At its best, then, an SLO may empower project-affected community members to define and enforce their expectations for a proponents' behaviour and activities. Consequently, they may also be equipped to hold the proponent to account, should those expectations be breeched (Wilburn & Wilburn 2011) or unfulfilled.

Implications for IA

Given its popularity with project proponents, its proliferating usage among a variety of stakeholders, potential for community-based accountability and progressive interest from formal regulators, the SLO holds strong interest for many in IA. Thus, in setting out a research agenda for SLO and IA, we are broadly interested in how SLO might inform or change IA. Whether for environmental, social, health, human rights or other forms of IA, the SLO concept presents several interesting opportunities. The following sections review core issues, drawn from the literature and our own field experience, and establish research questions to inform future research in this area.

First, given the strong research focus on measuring the SLO (Thomson & Boutilier 2011; Prno & Slocombe 2013; Moffat & Zhang 2014), might SLO offer IA an important means of operationalising impact prevention and mitigation? Particularly in the non-environmental IA fields, methods for measuring largely intangible factors, such as community wellbeing, social identity, community leadership, resilience and company–community relations, among many others, are improving but still developing (see, for example, Epstein & Buhovac 2014). SLO models such as that of Thomson and Boutilier (2011) provide a means of assessing the degree to which a proponent is accepted within any given community through exploration of social capital indicators intrinsically linked with expected or actual project impacts or benefits. Moreover, the project managers directly responsible for IA frequently have limited resources or experience with measuring, understanding and responding to identified social issues (Esteves et al. 2012). SLO measures, therefore, translate social impacts into a language better aligned with proponents' expertise and experience.

Second, IA practitioners report increasing requests from proponents to measure or monitor their SLO as part of broader IA projects. But is SLO appropriate and fruitful for informing IA? For instance, does an SLO represent an emergent form of stakeholder engagement, corporate responsibility and community empowerment? Or does it signal corporate rhetoric and pernicious avoidance of regulation? These concerns were reflected in presentations at IAIA14's conference session on ‘Earning the social licence to operate: lessons learned in impact assessment’ and are echoed in worldwide training offered to practitioners through SIA Hub (2014).

Furthermore, a range of global consultancies offer SLO services integrated within or adjunct to IAs. Indeed, this practice is now so widespread, Jim Cooney quipped in a recent interview that he wished he had trademarked the term (Leyne 2014). The consulting services offered are, themselves, a reflection of corporate interest. In the mining and extractives industry, major players are keenly focused on SLO (Macdonald & Schloeffel [date unknown]) and some, like Rio Tinto, state that an SLO is central to their corporate strategy (Rio Tinto 2011). Thus, we ask, how might consideration of an SLO inform prevention or mitigation of social, environmental, health, human rights or other impacts while enhancing benefits?

Third, should SLO definitions and measures continue to be developed along current lines, could an SLO offer community stakeholders a means through which to utilise IA results for accountability? This leads us directly to the question of how an SLO might best be measured and monitored through IA? For example, if IA data and accountability measures were available to communities as part of the SLO process, then proponents would also have a greater ability to respond to claims made against their SLO. While this particular opportunity requires much work, recent research demonstrates strong linkages between project impacts and the state of relationships between companies and communities (Moffat & Zhang 2014). If SLO is collaboratively constructed by corporations and community members (Harvey & Bice 2014), with clear understanding of definitions, criteria, brokerage processes and data transparency, then an integrated SLO–IA system may be possible. In other words, IA results and ongoing collection of impact community perception data – accessible to all relevant parties – could provide an agreed basis for monitoring a proponent's compliance against their SLO. While no such situation is currently known, given the gradual introduction of SLO into government regulation and corporate strategy, and the growing appetite of these actors to attach data to this rhetoric, it does not seem outlandish to suggest that such a relationship between SLO and IA may be on the horizon. Thus, we must consider whether and how the concept of SLO complements or competes with IA practice.

Finally, and as foreshadowed above, governments and regulators are showing an increasing interest in SLO and willingness to adopt its rhetoric. For example, recent developments in ‘social impact management plans’ (SIMP) (Franks & Vanclay 2013) show strong alignment with SLO. Legislation requiring SIMP or similar measures illustrates governments' growing concern about the social performance of the mining and extractives industry within their jurisdictions. Intergovernmental agencies, such as the International Finance Corporation (2007), and industry bodies, such as the International Council for Mining and Metals (ICMM 2014), embrace the importance of the SLO to the industry's success and sustainability. As Gunningham et al. demonstrated previously (2004, 329), regardless of whether an SLO is formally regulated, its usage – in any form – ‘intensif[ies] the overall constraints under which companies operate.’ It may only be a matter of time, therefore, before SLO and IA are formally linked in regulation. This spurs us to ask: what might the consequences of interlocking SLO and IA via regulation be, especially for project proponents and affected communities?

On a cautionary note, while regulation may bring comfort to governments seeking solutions to vexed and complex community concerns regarding mining development, and for companies seeking harder edges to a malleable and somewhat amorphous term, the utility of formalising SLO for communities is less clear. Increasing focus on legislating the procedural aspects of consultation and engagement as a means of mitigating operational impacts, for example, may come at the expense of relational capacity, trust and goodwill between the parties concerned (Lacey 2013). Consequently, the perceived ‘audit culture’ that currently pervades CSR and accountability in the mining industry may be perpetuated (Kemp et al. 2012).

Concepts, case studies and professional practice: a guide to the Special Issue

The articles in this Special Issue begin to answer the research questions posed and help us to consider the core opportunities and challenges raised when an SLO intersects IA. We present the articles in three thematic groups: ‘Concepts and emerging ideas’, ‘Case studies’ and ‘Professional practice papers’. These themes allow us to canvas theoretical developments, field-based research and practitioner experiences.

Concepts and emerging ideas

Through concepts and emerging ideas, the Special Issue explores the theoretical basis of an SLO, especially as it relates to IA. Distilling decades of research and practice focused on SLO, Boutilier (2014) delineates six ‘frequently asked questions’ to offer a concise but expert introduction to SLO and its measurement. He canvases the ways in which SLO facilitates prioritisation of stakeholder concerns and discusses socio-political and ethical concerns. Through exploration of the ways in which the SLO is integral to stakeholder networks, he explains how an SLO may be gained or lost.

Parsons and Moffat (2014b) continue the conceptual consideration of stakeholders through their exploration of the ways in which stakeholders understand project proponents' impacts and relationships. Drawing on in-depth interviews with affected landholders, the authors demonstrate the complexities communities face when formulating opinions about mining projects' impacts and the central role which trust plays in consequent perceptions about a project. Impacts and relationships, they argue, are therefore vital to a proponent's SLO.

Case studies

The case studies presented combine intensive fieldwork with sharp scholarly insight. Jijelava and Vanclay (2014) interrogate SLO from a gender perspective through exploration of social development assistance programs delivered by a nongovernmental organisation in Georgia. In so doing, the authors not only raise critical concerns about the need for a ‘gender-aware’ SLO, they also raise the question of whether multiple social licences should be sought and extend the concept of SLO beyond the usual-suspect corporation to NGOs.

Martinez and Franks (2014b) continue the thread of SLO and community development through their examination of corporate-sponsored community development at two Chilean mining operations. Their analysis links the SLO to corporate legitimacy and demonstrates that, even where development projects are well-intentioned, if they fail to establish community co-ownership, are poorly planned or deemed superficial, such actions can undermine an SLO and, consequently, corporate legitimacy. In these cases, therefore, mining companies' social development programs proved to be a ‘necessary but insufficient factor in achieving community legitimacy and social licence to operate’.

Ruckstuhl et al. (2014) investigate SLO as related to Indigenous New Zealanders, Maōri. Like Martinez and Franks (2014), they also assert the importance of community ownership of the SLO process in order for the licence to hold meaning and legitimacy, and introduce the notion of a particularly Maōri SLO, as exercised through the Treaty of Waitangi. Through their articulation of the ways in which Maōri values, cultural IAs and legislative contributions affect the SLO, they remind us that the SLO is particular to each operational site and raise intriguing questions about the ways and extent to which local values must be incorporated into any SLO.

Brueckner et al. (2014) draw upon three case studies from Western Australia to illustrate the tensions between governmental agendas for economic development and local socio-cultural and environmental impacts. In so doing, they posit a ‘political licence to operate’ (PLO), suggesting that where governments adopt an economic developmentalist agenda, social and environmental concerns take a backseat, resulting in an SLO which is gravely lacking on the social component. Their notion of the PLO will likely ring true for many practitioners and raises further questions about the extent to which SLO can empower communities where other, perhaps more powerful, agendas are at play.

Professional practice paper

Finally, Harvey and Bice (2014) complete the issue with an exploration of the tensions and contradictions in intent and practice that are inherent in the way that the extractive sector conducts its business. They draw out the unintended contradictions between increasing standards regarding formal engagement of communities through SIA and increasingly generous and sophisticated benefits and social development programmes. The increase in social conflict and broad based dissatisfaction with mining activity which appears to result as a consequence is explored. They then suggest a collaborative approach to SLO, focusing on mobilising a company's core competencies, achieving credibility through total transparency, and maintaining appropriate roles and responsibilities of companies, governments and communities to achieve greater trust between the parties to resource development.

Conclusion

SLO speaks to some of the greatest challenges to sustainable development: the role of affected and distal communities in shaping development trajectories, increasing expectations on industries from communities and governments, unequal power relations between key stakeholder groups, the complexity of building meaningful and lasting relationships between these groups based in mutual trust and the challenge of finding a common language and approach among stakeholder groups to achieve deeper, more mutually acceptable ways of co-existing. Through this article we aimed to pinpoint the critical junctures between SLO and IA in order to propose a research agenda for the field. We also aimed to survey burgeoning research in this area, as presented in this Special Issue of IAPA.

In canvassing the most recent literature and empirical developments in the concept and deployment of SLO, we identified several key areas of concern, including: measuring and monitoring SLO via IA, tensions and complementarities between SLO and IA's core concerns, potential of SLO to empower community stakeholders and improve proponent accountability for impacts and benefits, and the possible role of SLO in regulation linked to IA. A number of critical research questions flow from our discussion of these issues, especially:

• How is the SLO concept being defined and understood? Is it a meaningful and useful means of capturing and addressing social and environmental concerns?

• What is the SLO's appropriateness and utility to inform IA, if any? Might SLO improve stakeholder engagement, corporate responsibility and community empowerment? And how might SLO be deployed in such a way as to avoid becoming a purely rhetorical or public relations device?

• How might consideration of an SLO inform prevention or mitigation of social, environmental, health, human rights or other impacts while enhancing benefits?

• How is SLO currently being applied in IA and what lessons are being learned?

• How does the concept of SLO complement or compete with IA practice?

These are big questions, and in editing this Special Issue, we have been both excited and challenged by the ideas presented. Our contributing authors have explicitly explored SLO and IA in ways that add depth and breadth to our knowledge about both.

It is our ambition, therefore, that the Special Issue articles establish a foundation for debate, highlight key, current concerns, and catalyse an informed deliberation about the appropriate role, boundaries and practices for SLO within IA. If SLO is to have longevity and practical usefulness in the mining and extractive industries, this kind of critical attention is necessary and timely. We hope that this Special Issue of IAPA on SLO and IA provides one such opportunity to inform the way relationships between mining and the context in which it operates are developed.

Notes

^1. Papers submitted to the IAIA13 conference are available at: http://www.iaia.org/conferences/iaia13/final-papers.aspx. The final program listing the presentations concerning SLO is available at: http://www.iaia.org/conferences/iaia13/documents/Finalpro_13%20web.pdf

^2. Papers submitted to the IAIA14 conference are available at: http://www.iaia.org/conferences/iaia14/final-papers.php. The final program, listing presentations relevant to SLO is available at: http://www.iaia.org/conferences/iaia14/documents/Finalpro_14%20web.pdf