Big read: Why your company's 'social licence' could expire

Bruce, an old mate of mine, has a driving test story that takes some beating. At a testing station in 1970s Hastings, his instructor said "I'll wait here" and simply told him to drive round the block. That's right – he did his practical test alone.

Now, thankfully, things have changed. In 2018 parlance, there's no longer a "social licence" for dodgy driver's licence tests.

But hold on. "Social licence"? What does the phrase even mean? Who's using it, and why? And how exactly do you pass a "social licence" test anyway?

Lately, from where I sit at the intersection of business, research and public policy, talk of "social licence" seems to be everywhere. Recently, for example, you could read about Fonterra losing its social licence, and the Government developing a "social licence for personal data use". It's also being applied to new contexts all the time, like data and privacy.

So, is it fashionable jargon? Something truly meaningful? Or somewhere in between?

Anthropologists have been using the phrase for decades, usually in the context of getting away with something illegal or otherwise frowned upon – public drunkenness for example. Later, in the 1990s, the use of the phrase blossomed in connection with mining industries. This was spurred by increasing international pressure for social and environmental issues to be considered alongside economic returns, amid increasing conflict between mining operators and community groups.

A key event was a March 1996 mining disaster, in Marinduque in the Philippines. The Marcopper Mine, operated by Canadian company Placer Dome, spilled several million tonnes of mining waste into the Boac River, destroying the region's water supply. The disaster, with other factors, prompted a shift by the Philippines Government to a stricter regulatory regime.

In the aftermath, a Placer Dome executive described a new industry challenge – obtaining a "social licence to operate", or "SLO". Usage then quickly spread, connected mainly to the idea of the "social risks" around potentially losing public favour. So, interestingly, "social licence" seems to have been first popularised not by activists or government, but by business.

Social licence in Aotearoa: From mining, to tourism and data use

Two decades on, the issue of social risk for business endures. In an era where we understand more acutely the damage many industries are doing to the environment, it's more relevant than ever – and in a much broader context than just mining.

Use of the term "social licence" has exploded in the 2010s – in New Zealand as overseas. A 2016 local survey noted the term being used here across industries like forestry, farming, dairy and even tourism. For instance, Tourism NZ Board member Raewyn Idoine recently argued that dairy farming's "social licence disqualification" is a cautionary tale for the tourism industry: "Everybody loved farmers until they started polluting streams and rivers and making butter cost too much".

The term's also been applied to the very broad and touchy area of data use and privacy. The Data Futures Partnership, a ministerial advisory group set up in 2016, has set up guidelines to help businesses address and explain their practices around data collection and use, in the interests of gaining their own version of a "social licence". The guidelines focus on eight questions that organisations can address in order to explain how they collect and use data, to better build trust with clients and the wider community (see below).

Obtaining social licence has even become an issue for pest management programmes and other state and community environmental efforts. Mike McGavin, a keen tramper who blogs as Windy Hilltops, noted that:

"People need to care about the outcome [of an initiative] before they can give it a social licence, and so when people can be steered towards understanding what might be at stake, in part through the enthusiasm for and engagement with … local projects, it's a crucial thing for goals like Predator Free 2050."

Influences and challenges in Aotearoa: Te Tiriti o Waitangi

Particularly relevant for Aotearoa is that "social licence" has often figured in discussions around the interests of indigenous peoples. Of course, in this country, we already have a distinctive, well-developed framework for these discussions – te Tiriti of Waitangi.

Challenges to the social licence concept from Māori have invoked the Treaty and questioned some basic assumptions about exactly what or who the "social" in "social licence" refers to.

With two of her colleagues, Katharina Ruckstuhl of Ngāi Tahu has argued that in fact te Tiriti of Waitangi has a longer track record as a way for Māori to permit or withhold consent than the recent "SLO". As an example they point to the 2012 decision of Brazilian oil company Petrobras to give up exploration licences in the face of opposition from local iwi:

"What the Petrobras case makes clear is that for iwi like Te Whānau-ā-Apanui, a social licence has to be considered in the context of the Treaty of Waitangi …. Social licence will be granted only when it goes beyond regarding iwi as 'stakeholders', which limits the Indigenous Māori voice to an aggregated 'social' voice … and masks the specific history and experience of Māori."

Ruckstuhl & co counterpose a Treaty-based partnership approach instead. Some of the key connections here already have a statutory basis – for example, the Crown Minerals Act requires NZ Petroleum & Minerals to consult with iwi and hapū who will be affected by new mineral permits. Beyond strict legal requirements, much effort has also been invested into ways of interacting effectively in this mining context – like the best practice guidelines for engagement with Māori around mineral permits that have been developed by the Ngāti Ruanui iwi of Taranaki.

Pushback from a business voice

The social licence concept has also been criticised from a different quarter. In a 2013 blog post, Luke Malpass from the New Zealand Initiative, a business-backed research organisation, argued that there's a problem with this "so-called social licence":

"You cannot apply for it, there are no fees to pay, no compliance conditions and no objective criteria on which you can base your claim".

Malpass argues that since Parliament is the ultimate expression of community will, you can't elevate "community" to a higher level of authority than laws. Malpass cites examples from Australia, like the withdrawal of a fisheries licence by an Environment Minister, as highlighting the risk that "law-abiding businesses, making investment decisions in good faith, may find the rug pulled out from under them by social licence concerns".

But it seems a stretch to draw a line, as Malpass implicitly does, from a presumably lawful government decision to withdraw a licence because of "social licence" concerns, to a threat to the rule of law. All kinds of law-abiding people with all kinds of interests – commercial, environmental, recreational – may find themselves on the wrong end of a lawful government decision. That's the way things go in a democratic society.

Malpass' narrow conception of democracy seems to leave little room for the broad range of discussions and negotiations that are critical to democracy.

I like economist-philosopher Amartya Sen's understanding of democracy as "government by discussion". He's written: "Democracy has to be judged not just by the institutions that formally exist but by the extent to which different voices from diverse sections of the people can actually be heard" (The idea of justice, 2009).

In other words, healthy democracy consists of many different conversations – of different types, through different channels, and between different groups of people.

Limitations of the 'licence' metaphor

Luke Malpass, who describes the social licence concept as "pernicious", isn't just objecting about whether the term is useful – his criticisms are fundamental. But I think his objections tell us something about the term's limitations for helping us discuss and think about important issues.

The word "licence" can of course be applied meaningfully in many contexts, but its purpose in the phrase "social licence" is basically metaphorical. It's inviting us to think of, for example, the licences that entitle us to drive – that is, official permission with clear scope and granted only after strict testing and issuing processes.

The problem with the metaphor is that the real-world things that "social licence" seems to refer to – community support, public pressure and so on – are in fact inherently fuzzy-edged. At the same time, the definitions put forward for the term itself have varied significantly.

The term "social licence" now appears to be monopolising our thoughts on key issues. Today when different players or commentators are thinking about issues to do with community responses to private-sector or government projects, they grab at the term to communicate their thoughts. But because this metaphor is such a rough fit, I'd argue that it has passed its best-before date. It's become an easy buzzphrase that risks replacing detailed thought and analysis rather than facilitating it.

What do we replace it with?

The explosion in "social licence" use isn't random fashion – it reflects a changing social, political and technological environment. Social media and instant global communication now make tracking events, like a Philippines mining disaster, infinitely easier than in the 1990s. Interest groups can now rally high-profile support rapidly, so government, business and NGOs now face a reality where public endorsement for their projects can be won or lost in hours rather than years.

Those developments have shaped and boosted social licence discourse. The challenge now is to transcend the limitations of this term for discussing and addressing public policy issues.

So what do we replace "social licence" talk with?

Well, we need to be more specific and more substantive. When talking about a particular government or business initiative, we might ask what a healthy democratic society might expect them to aspire to. For example, is merely passive acquiescence from the community enough? Or should the goal be more active, more participatory forms of approval, endorsement or involvement?

The "Pyramid Model", originally developed by mining industry consultants as a way of thinking about social licence, tackles these issues. The model incorporates a range of potential community responses to projects and the different kinds of relationships an enterprise like a mine might have with a community. Rather than seeing social licence in terms of a simple on-off toggle switch, as with an official legal licence, the Pyramid Model gives us a framework of options and nuances.

The beginner's licence at the base of the pyramid is about Legitimacy – here, the mine or other initiative has won only bare acceptance, after playing by the rules and meeting the minimum legal, social and cultural norms.

Aim higher and work harder and the second level of the pyramid earns you Credibility – here, more than simple acceptance, you've earned positive approval through negotiating with communities.

At the top of the pyramid is Trust – with this full licence, the community and other stakeholders have a sense of co-ownership with you, and are willing to take on a certain level of risk alongside you.

Here in Aotearoa, this influential Pyramid Model has been adapted by Ngāti Porou Fisheries in developing its Land-Based Aquaculture Assessment Framework:

Another more solid concept that focuses on specific kinds of relationships and interactions is "networked governance". Canadian academic Joel Gehman and colleagues note that:

"The emergence of social licence mirrors a broader trend towards 'networked governance', or a shift from traditional hierarchical and centralised governance to a more horizontal mode".

With networked governance, these writers say, "democratic accountability derives as much from judgments of the target population of policy initiatives [as from] officials acting as the final decision-makers".

Or as another commentator put it, with networked governance "smart governments pull in the knowledge and experience of citizens to inform decision making and work with external actors to create value".

Back on the road

It's justified to scoff at laughable and/or alarming practices of old. Back in the day, New Zealand's primitive cars and challenging roads, plus a drink-drive culture and poor driver testing, meant significant fatalities. So we don't just send newbie drivers round the block nowadays – the quality of the licences we issue matters, and we now issue good-quality licences that save lives.

If there's a useful analogy here, it's perhaps that having viable ways to express or withhold social approval also matters a great deal to a democratic society. Having these discussions are a critical part of shaping a better future.

But let's just make sure we know what we're talking about when we have them.

Kevin Jenkins is an experienced business consultant who co-founded professional services firm MartinJankins. Click here to see more of his articles.