In an era of increasing environmental and social awareness, companies worldwide realise that operating solely for profit is no longer sufficient. Beyond financial success, businesses are expected to demonstrate ethical practices, accountability, and a positive impact on society and the environment. The Social License to Operate (SLO) concept has emerged as a crucial framework to address these expectations and foster a harmonious relationship between businesses and their communities.
Background of SLO
The term “Social License to Operate” originated in the 1990s as a response to mounting concerns about the impact of specific industries, such as mining, forestry, and oil and gas, on local communities and the environment. SLO refers to the level of acceptance and approval a company or project has from the communities, stakeholders, and the broader public within which it operates. It is an intangible but vital asset that enables businesses to carry out their activities smoothly without facing significant opposition or resistance.
Importance of SLO
The Social License to Operate is crucial for businesses in today’s interconnected world for several reasons:
1. Public Trust and Reputation: SLO is built on trust, and public perception of a company’s ethical and social responsibility directly impacts its reputation. A positive reputation attracts investors, customers, and talent, while a negative one can lead to boycotts, protests, and damage to the brand.
2. Long-term Sustainability: Sustainable business practices are now imperative for ensuring the longevity of operations. Companies can avoid facing legal and regulatory hurdles, operational disruptions, and potential closure with the social license.
3. Risk Mitigation: Companies that engage in open dialogue with stakeholders and address their concerns are better equipped to identify and mitigate potential risks early on. Businesses can avoid unnecessary conflicts and financial losses by involving local communities in decision-making.
4. Access to Resources: The social license often influences access to natural resources, permits, and licenses required to operate in certain regions. Governments and regulatory bodies take into account community sentiment when granting approvals.
Who Grants the SLO?
The Social License to Operate is not a formal license issued by any specific authority. Instead, a collective agreement emerges through ongoing engagement and communication between the company and its stakeholders. These stakeholders include local communities, indigenous groups, NGOs, governments, employees, customers, and other entities impacted by the company’s activities.
Benefits of SLO
1. Enhanced Community Relationships: Building a robust social license fosters positive relationships with local communities, leading to mutual understanding and respect.
2. Innovation and Collaboration: Engaging with stakeholders can lead to innovative solutions, as diverse perspectives bring new ideas and approaches.
3. Attracting Investors and Customers: Socially responsible companies often attract socially conscious investors and customers, resulting in a competitive advantage.
4. Operational Efficiency: A supportive community can lead to smoother operations, fewer delays, and increased productivity.
Categories of SLO
The Social License to Operate can be categorised into three primary levels:
1. Explicit License: This level represents formal approvals, permits, and licenses from governments and regulatory bodies to conduct specific activities. It ensures compliance with legal requirements.
2. Implicit License: This level goes beyond legal requirements and focuses on meeting societal expectations and norms. It involves engaging with stakeholders and addressing their concerns even when not mandated by law.
3. Emergent License: The highest level of SLO, the emergent license, is not based on any specific set of rules but on the acceptance and trust earned from stakeholders through transparent and ethical practices.
The Range of SLO
The Social License to Operate is not static; it can evolve and change over time. A company may have widespread support and acceptance at one end of the range, allowing it to innovate and expand. Conversely, a company may face strong opposition, leading to operational challenges and potential threats. Companies must continually assess their social license and proactively maintain or improve it.
The Social License to Operate is not merely a buzzword; it has become a critical aspect of doing business responsibly and sustainably in the modern world. Companies that recognise the importance of engaging with stakeholders, being accountable for their actions, and demonstrating a genuine commitment to the welfare of society and the environment are more likely to earn and maintain the social license they need to thrive. As stakeholders become increasingly conscious of the impacts of businesses, embracing the principles of SLO will be vital for companies’ long-term success and survival in a rapidly changing global landscape.
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