Social license to operate

Definition

Social license to operate refers to the ongoing acceptance and approval of a company or project's activities by the local community and stakeholders. This concept emphasizes that formal permits and regulatory approvals alone are not sufficient; organizations must also earn the trust and support of those affected by their operations. It reflects the importance of community engagement and transparency in ensuring sustainable development and minimizing conflicts.

5 Must Know Facts For Your Next Test

1. A social license to operate is often informal and can be influenced by public perception, local culture, and community relationships.
2. Companies lacking social license may face opposition from local communities, resulting in project delays, increased costs, or even project cancellations.
3. Maintaining a social license requires ongoing communication and active participation in community issues and concerns.
4. The loss of social license can lead to reputational damage, affecting a company's long-term sustainability and profitability.
5. Successful projects often demonstrate how they create benefits for the local community, which helps build and maintain their social license.

Review Questions

• How does social license to operate influence a company's decision-making process regarding environmental practices?
  • Social license to operate significantly impacts a company's decision-making by making it essential to consider the views and concerns of local communities. Companies are increasingly recognizing that community support can dictate the success or failure of their projects. Therefore, they may prioritize environmentally friendly practices, transparency, and engagement with stakeholders to build trust, which can help secure this informal approval and ensure long-term operational success.
• Evaluate the relationship between social license to operate and stakeholder engagement in the context of environmental impact assessments.
  • The relationship between social license to operate and stakeholder engagement is crucial during environmental impact assessments. Stakeholder engagement is fundamental to understanding community concerns and expectations, which directly influence a company's social license. By actively involving stakeholders throughout the EIA process, companies can better address potential environmental impacts and enhance their credibility, leading to a more robust social license and minimizing resistance from local communities.
• Assess how the absence of a social license to operate can affect the long-term viability of projects within environmentally sensitive areas.
  • The absence of a social license to operate in environmentally sensitive areas can severely undermine the long-term viability of projects. Without community support, projects may face legal challenges, protests, or regulatory pushback, leading to significant delays or outright cancellation. Moreover, negative public perception can hinder future investments and collaboration opportunities. Companies must therefore prioritize building relationships with local communities and stakeholders to ensure sustainable development that aligns with both business objectives and environmental stewardship.

Related terms

Stakeholder Engagement: The process of involving individuals, groups, or organizations that may be affected by or have an interest in a company's activities.

Corporate Social Responsibility (CSR): A business model in which companies integrate social and environmental concerns in their operations and interactions with stakeholders.

Environmental Impact Assessment (EIA): A process that evaluates the potential environmental effects of a proposed project before it is carried out.