The value of ‘social licence’

“Corporate social responsibility,” “social licence,” “social investment,” “millennium development goals,” “poverty alleviation,” “community development”. . . Suddenly, a whole new jargon has emerged, and with it, increased complexity for mining projects in developing economies.

The mining world has changed dramatically. Projects can be stopped dead by local people and communities, dashing shareholder’s hopes and often destroying executives’ careers. Project management has become exponentially more complex as social issues no longer take a distant backseat to technical issues.

“Social licence” is a relatively new term that refers to the formal and informal approval a company requires from stakeholders before it carried out work. A company is required to develop ongoing, positive relationships with the stakeholders in order to obtain support from the people who are likely to be affected by its activities.

Today, if a project hopes to acquire and retain a social licence to operate, it must demonstrate it is creating local value. This sort of social investment, though relatively new, is one the mining industry has embraced. Examples such as Peru’s Tambo Grande and the Esquel project in Argentina clearly demonstrate that even with good intentions and considerable investment in local development, a social licence is not guaranteed. Local communities can lose opportunities for improved infrastructure, education, health services and economic development.

The challenge is to find a responsible way of pushing ahead, one that meets the needs and aspirations of local stakeholders, fits within the government’s development framework, and preserves the environment. Often, the first reaction is knee-jerk: simply throw money at social issues. But without a strategy, this approach often fails and leaves everyone, locals included, worse off.

My experience in more than 40 social-licence projects in 26 countries has taught me that a comprehensive, partnership-building approach is effective. It’s all about value.

Let me use a hypothetical example to explain: Suppose you have a promising new discovery in a remote location and a limited budget for social issues, yet you must secure a social licence if your project is to proceed through licensing and permitting and into commercial production. Start by asking yourself questions about value and key stakeholders. Who are the key local stakeholders? If you can develop your project into an operating mine, what value can that development produce for local stakeholders? Can you act as a catalyst for bringing them additional value? Mostly the value you can deliver, or help to catalyze, will be in areas such as local social and economic development, education, healthcare, gender equity, HIV/ AIDS programming, and so on.

Wait, you say. . . . This is poverty alleviation. A huge task. Government’s responsibility and far beyond our financial and management capacity.

You are right. It is such a major challenge that the member states of the United Nations got together in a special millennium session and hammered out what are knowns as “millennium development goals,” which are concerned with the same poverty-alleviation issues you will be considering in relation to your own project. The goals form a rough guideline for the development-assistance budgets of member nations of the Organization for Economic Co-operation and Development, such as Canada.

Suddenly, your efforts to secure a local social licence have something in common with development agencies around the world, and with many non-governmental organizations. This commonality creates opportunities for developing partnerships and for increasing the value you can deliver into local communities. There is a direct relationship between the social value you help create, the strength of your social licence, and the value you create for shareholders.

— The author is the founding partner of Wayne Dunn & Associates, a Canadian consultancy firm that works throughout the world with private-sector clients. He is currently working on projects in every continent except Australia and can be reached by e-mail at at wayne@waynedunn.com