What is a Social Licence To Operate?

A social licence to operate, or SLO. What is it and why does a company need one?

A social licence to operate is a concept rather than a contract. There are no documents to sign. There is nothing written down. There is no official piece of paper with Social Licence To Operate written across the top. Despite its intangibility however an SLO is often hugely significant for a mining company.

A company can be said to have an SLO when it has been granted 'unspoken' and ongoing acceptance and approval by local communities and various other stakeholders to operate a project. In other words, the local community and anyone else who may be affected by the project have tacitly agreed that they won't stand in the way of its development and operations. Having said this however there are different levels of SLOs based on the level of acceptance and trust given to the project. An SLO can also change or be revoked should the project lose the trust of the community and stakeholders. It' very much a case of the community givith and the community can also taketh away.

The Social Licence To Operate is a fairly recent concept. It's derived from the wider "Corporate Social Responsibility" (CSR) concept through which companies have traditionally managed the ethical, legal, economic and philanthropic aspects of their operations. CSR has been around in various forms since the 1930's. However, it wasn't until nearly half a century later, in the 1980's boom years, that local communities began to really exercise the power they have to leverage mining companies into operating more sustainably and with more respect for them and the environment. It wasn't enough any more for mining companies to splash money around and 'buy' co-operation from communities with extravagant promises.

People were becoming more and more informed around environmental and social issues generally in relation to mining activities, which led to increasing demands that mining companies take more social and environmental responsibility for their activities. They were now a lot more knowledgeable about how poor environmental management (contamination of ground water for instance) can directly affect the health and well being of local communities. And they'd also realised that they didn't 'have' to put up with (and shut up about) the inconveniences and disruptions a mining project could cause to their community and way of life. Many mining companies subsequently found out the hard way that they either complied with the demands of local communities or they dealt with the expensive problems an angry community could, and often did, cause to their operations (vandalism, road blocks etc).

Communities Begin To Change Corporate Cultural Thinking

The flow on effect of all this brought about significant changes in corporate thinking around a company's social responsibilities towards the communities they affect with their mining activities. Ultimately it also created the notion that mining companies should obtain 'social permission' for their mining activities, particularly if they wanted to avoid a lot of expensive problems! During the 1990's this notion of social permission became increasingly widespread across the industry. Eventually Jim Cooney, a mining executive from Canada, coined the phrase "Social Licence to Operate" to describe this aspect of a mining company's responsibilities and obligations.

Today the concept of earning and maintaining an SLO is fairly well entrenched in mining culture consciousness. Most mining companies now consider it to be one of the important boxes that needs to be ticked as part of the overall operation of a project, both during establishment and throughout its operational life. Indeed, without an SLO some governments won't issue the formal permits and licenses required for a project to get off the ground!

The SLO is usually factored into the cost structure of most mining projects now and is considered a 'wise' business investment that ultimately will pay dividends, not the least in terms of peaceful co-existence with the locals.

Different Levels Of Social Licences To Operate

An SLO may be one of approval or it may be one of acceptance. Approval implies that the community and other stakeholders agree to, are pleased with and / or favourably regard the project. This is the most desirable type of SLO as it generally leads to better relationships between the parties involved, some of who may also have an active interest in the project (employment, increased business etc).
Mere acceptance is more difficult to deal with because it indicates that whilst the community and stakeholders may have decided to accept, tolerate or consent to the presence of the project, they aren't fully on board with it. Companies that only have this level of an SLO need to be mindful that whilst it may be sufficient to give the project the green light, the community is going to be watching, and waiting, for the slightest fallout. And that it won't take much for a strong minded opponent of the project to whip up anti community sentiment, resulting in the withdrawal of the SLO.

The Social Licence To Operate And The Law

In countries that operate under the principles of common law, the idea of a dynamic ever-evolving SLO fits in with legal customs. However, in countries that operate under civil law the situation is not so simple. Civil law follows official ordinances and codified statutes regardless whilst common law follows previous judicial rulings and legal precedents. Therefore, because civil law presupposes that official licences are issued by official authorities, in accordance with official statutes, the concept of an unspoken 'agreement' like an SLO is somewhat alien to these legal systems. Many South American countries operate under civil law and some of these, like Brazil, are important mining economies. So in these economies we see SLOs regarded more as official licences, controlled by regulatory authorities and connected to certain responsibilities and events.

It's also worthwhile noting that just because a company has an SLO for one project, it doesn't automatically follow that they can transfer that SLO to other projects. Or that they'll automatically get SLOs for all their projects just because they have one for one particular project. Each SLO needs to be earned, and granted, on its merits. Moreover, it gets harder to obtain an SLO the bigger the impact a project has, or will have, on its surrounding environment, economy and communities.

I'll be talking about the components of an SLO and what it takes to establish and maintain one in a future article so stay tuned. And as always, if you require mining professionals, please feel free to get in touch with me.

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Tuesday, 20 April 2021
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