The concept of a social licence to operate has played a significant role in the discussion and debate about engaging communities and stakeholders in renewables developments. It is becoming more and more apparent, this concept alone will not effectively address the challenges associated with the energy transition. To navigate the complexities and foster meaningful social impact, a comprehensive social performance approach is needed.
Moving from social licence to operate to social performance provides an opportunity for the energy industry to transition from a risk-based approach to a more proactive practice which acknowledges and benefits from the catalyst effects of the industry in local communities and seeks to address more complex expectations that arise from impacted territories, beyond operational continuity.
The concepts of social licence, social value, social performance, and the "S" in ESG are sometimes used interchangeably, however they are unique concepts and refer to different aspects of the relationship with communities and contributions to social development.
What is social licence to operate and what are its limitations?
The concept of a "social licence to operate" (SLO) refers to the acceptance and approval granted by the community or stakeholders for a company or organisation to conduct its activities. While the concept is generally seen as important for building trust and maintaining legitimacy, it is not without criticism.
Some of the criticism regarding SLO includes being reactive and lacking clear guidelines for implementation (Owen & Kemp, 2013). This has led to inconsistent outcomes, strained relationships between mining companies and communities, and reputational risks for the industry.
Other limitations include:
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Lack of clarity and consistency: the ambiguity around what constitutes a social licence for different organisations and how it can be obtained and maintained raises concerns about accountability and transparency.
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Power imbalance and tokenism: critics argue that the concept of a social licence can perpetuate power imbalances, where the decision-making authority remains concentrated within companies or governments, with limited input from affected communities. In some cases, obtaining a social licence may be seen as a tokenistic exercise, where companies engage in superficial consultation without meaningful involvement or influence from stakeholders.
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Inadequate representation: the social licence concept often fails to adequately represent the interests and perspectives of marginalised or vulnerable communities. It may prioritise the views of influential stakeholders, such as government bodies or well-organised interest groups, while neglecting the voices of those directly affected by projects or operations.
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Lack of legal enforcement: relying on voluntary acceptance from communities and stakeholders may not provide sufficient safeguards against negative impacts, as companies can still operate without securing meaningful consent or addressing community concerns.
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Potential for greenwashing: companies may engage in public relations efforts to create the perception of social acceptance without genuinely addressing underlying social and environmental issues.
While SLO has increased industry attention on the expectations of society and community concerns, there is little evidence to demonstrate the practice is effectively influencing project design to avoid or minimise social impacts or considering the voices of the most affected people. The complexity of the energy transition requires a refreshed approach that steps back from transactional activities and focuses on positive social performance.
What is social performance and how can it better support the energy transition?
Social performance is about the outcomes of a company’s engagement, activities and commitments that can impact stakeholders and hosting communities or affect the quality of its relationships with them (ICMM, 2023).
Social performance supports the consistent management of social risks and impacts (positive and negative) from a business or project on individuals, communities, and the environment, and the contribution to social sustainability of hosting communities by delivering better outcomes.
Transitioning towards social performance represents a shift in mindset and organisational practices. It requires organisations to embed social considerations throughout the early planning, design and delivery of projects through to decommissioning and closure. A social performance approach provides the processes and guidelines for ongoing implementation, monitoring and review. It fosters open and transparent engagement with stakeholders and incorporates local knowledge and cultural sensitivity into decision-making processes.
While the transition from social licence to operate to social performance may present challenges and require organisational changes, the benefits are significant. The transition to social performance holds the promise of a more responsible and mutually beneficial relationship between industry and the societies in which they operate.
WSP’s approach to social performance
WSP understands the success of embedding social performance relies on its co-design with key stakeholders as part of an ongoing process. This requires project specific design, piloting and testing.
WSP’s Communities and Social Performance teams have played a key role in supporting organisations to embed social performance. We are currently working with some of Australia’s biggest energy operators to help them achieve their goals for a just transition.
To learn more about how our teams can support your projects, contact the author Carla Martinez (New South Wales), Kim Clemesha (Queensland and Northern Territory), Danielle van Kampen (Western Australia) or Felicity Richards (South Australia).
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