What is Social Licence to Operate?

The concept of the social license to operate (SLO) has become increasingly important in recent years as companies have come under increasing scrutiny from the public regarding their impact on society and the environment. In essence, the social license to operate refers to the level of acceptance or approval that a company has from the community in which it operates. Without this license, a company may find it difficult to carry out its activities, attract and retain employees, and secure financing and partnerships.

The concept of the social license to operate emerged in the mining industry in the 1990s, but has since been adopted by companies in various industries including oil and gas, agriculture, and manufacturing. The term was coined by James Cooney, a mining engineer and consultant, who argued that a mining company could not operate in a community without the support and acceptance of that community.

The social license to operate is based on the idea that companies have a responsibility to consider the social and environmental impacts of their operations and to engage with stakeholders in a transparent and respectful manner. Stakeholders may include local communities, indigenous groups, employees, investors, governments, and NGOs. Companies must engage with these stakeholders in order to understand their concerns, expectations, and needs, and to develop strategies to address them.

There are a number of factors that can affect a company’s social license to operate. These include its impact on the environment, its treatment of employees and local communities, its level of transparency and accountability, and its involvement in controversial activities such as human rights abuses, corruption, and environmental degradation.

To obtain and maintain a social license to operate, companies must engage in a process of ongoing dialogue and engagement with stakeholders. This may involve conducting social and environmental impact assessments, developing community development programs, implementing environmental management systems, and establishing grievance mechanisms for stakeholders.

In recent years, the social license to operate has become increasingly important for companies seeking to operate in developing countries, where there may be greater risks of social and environmental impacts, and where there may be weaker legal frameworks and regulatory oversight.

While the concept of the social license to operate is still evolving, it is clear that companies must take a proactive and strategic approach to engaging with stakeholders and addressing social and environmental concerns in order to obtain and maintain their license to operate. Companies that fail to do so may face reputational damage, legal action, and financial losses. Ultimately, the social license to operate is about building trust and legitimacy with stakeholders, and demonstrating that a company is committed to creating long-term value for society and the environment. (hmd)

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