Skip to main content

The Social License to Operate

Abstract

This article proposes a way to zoom in on the concept of the social license to operate (SLO) from the broader normative perspective of contractarianism. An SLO can be defined as a contractarian basis for the legitimacy of a company’s specific activity or project. “SLO”, as a fashionable expression, has its origins in business practice. From a normative viewpoint, the concept is closely related to social contract theory, and, as such, it has a political dimension. After outlining the contractarian normative background to the SLO, we will show how academic concepts such as legitimacy and stakeholder management have a tendency to provide the intellectual underpinning for the business case for securing an SLO. While business case perspectives on the SLO may well be in line with the use of the term in business practice, we will highlight certain difficulties and ambiguities related to the instrumental use of the expression. In the final section, we briefly introduce the articles of this Special Issue to the reader and explain how they relate to the topic.

This is a preview of subscription content, access via your institution.

Notes

  1. “Probierstein der Rechtmäβigkeit eines jeden öffentlichen Gesetzes”; cf. “Allein dieser Vertrag […] ist keinesweges als ein Faktum vorauszusetzen nötig” (Kant 1793).

  2. Under conditions of globalization and the fragmentation of social and legal orders, Palazzo and Scherer, developing the notion of “moral legitimacy”, argue for a “radical” repositioning of legitimacy, proposing a discursive concept, under which companies not (only) engage with influential groups, but must actively justify their actions towards society as quasi political actors (cf. Palazzo and Scherer 2006). Our hunch is that this deliberative approach is much closer to Kantian contractarianism based on good reasons rather than a Hobbesian vision based on interests.

  3. Managing an SLO is therefore not necessary when and where an organization’s presence and activities are already taken for granted or not questioned at all, because they cannot even imagine an alternative (cf. Suchman 1995: 574, who speaks of “cognitive legitimacy” that is difficult to influence).

  4. According to mainstream stakeholder theory as it is defended by Freeman and others, stakeholder interests are taken into account instrumentally, i.e. with a view to maximizing the value of the firm (see for example Phillips et al. 2003: 479, 486 et seq. See also Jones 1995 for the notion of instrumental stakeholder theory).

  5. FPIC requirements have gained international attention through their inclusion in the United Nations Declaration on the Rights of Indigenous Peoples (see UN resolution 61/295 of 13 September 2007). The principle plays a role in the policies of international organizations (such as the UNDP, ILO or the World Bank and its International Finance Corporation) related to development or extraction projects and working conditions, and has been implemented in some national laws, either as a customary international law principle or explicitly in legal texts.

References

  • Aldrich, H. E., & Fiol, M. C. (1994). Fools rush in? The institutional context of industry creation. Academy of Management Review, 19, 645–670.

    Google Scholar 

  • Ashforth, B. E., & Gibbs, B. W. (1990). The double-edge of organizational legitimation. Organization Science, 1, 177–194.

    Article  Google Scholar 

  • Baba, S., & Raufflet, E. (2014). Managing relational legacies: Lessons from British Columbia, Canada. Administrative Sciences, 4, 15–34.

    Article  Google Scholar 

  • Banerjee, S. B. (2010). Governing the global corporation: A critical perspective. Business Ethics Quarterly, 20(2), 265–274.

    Article  Google Scholar 

  • Basu, K., & Palazzo, G. (2008). Corporate social responsibility: A process model of sensemaking. Academy of Management Review, 33(1), 122–136.

    Article  Google Scholar 

  • Black, L. (2013). The social license to operate: Your management framework for complex times. Oxford: Do Sustainability [Sedition Publishing, Ltd.].

    Google Scholar 

  • Boutilier, R. G., Black, L., & Thomson, I. (2012). From metaphor to management tool: How the social license to operate can stabilise the socio-political environment for business. In International mine management 2012 proceedings (pp. 227–237). Melbourne: Australian Institute of Mining and Metallurgy.

  • Bowen, F., Newenham-Kahindi, A., & Herremans, I. (2010). When suits meet roots: The antecedents and consequences of community engagement strategy. Journal of Business Ethics, 95(2), 297–318.

    Article  Google Scholar 

  • Buhmann, K. (2016). Public regulators and CSR: The ‘Social Licence to Operate’ in recent united nations instruments on business and human rights and the juridification of CSR. Journal of Business Ethics. doi:10.1007/s10551-015-2869-9.

    Google Scholar 

  • Castello, I., & Lozano, J. M. (2011). Searching for new forms of legitimacy through corporate responsibility rhetoric. Journal of Business Ethics, 100, 11–29.

    Article  Google Scholar 

  • Claasen, C., & Roloff, J. (2012). The link between responsibility and legitimacy: The case of De Beers in Namibia. Journal of Business Ethics, 107, 379–398.

    Article  Google Scholar 

  • Coumans, C. (2011). Occupying spaces created by conflict: Anthropologists, development NGOs, responsible investment, and mining: with CA comment by Stuart Kirsch. Current Anthropology, S3, S29–S43.

    Article  Google Scholar 

  • Cui, J., Jo, H., & Velasquez, M. (2016). Community religion, employees, and the social license to operate. Journal of Business Ethics. doi:10.1007/s10551-015-2865-0.

    Google Scholar 

  • Davis, R., & Franks, D. (2014). Costs of company–community conflict in the extractive sector. In Corporate social responsibility initiative report no. 66. Cambridge, MA: Harvard Kennedy School.

  • Deegan, C., & Shelly, M. (2014). Corporate social responsibilities: Alternative perspectives about the need to legislate. Journal of Business Ethics, 121, 499–526.

    Article  Google Scholar 

  • Donaldson, T., & Dunfee, T. (1999). Ties that bind: A social contract approach to business ethics. Boston: Harvard Business School Press.

    Google Scholar 

  • Dowling, J., & Pfeffer, J. (1975). Organizational legitimacy: Social values and organizational behaviour. Pacific Sociological Review, 18, 122–136.

    Article  Google Scholar 

  • Dworkin, R. (1977). Taking rights seriously. Cambridge (Ma.): Harvard University Press.

    Google Scholar 

  • Freeman, R. E. (1984). Strategic management. A stakeholder approach. Boston: Pitman.

    Google Scholar 

  • Freeman, R. E., Harrison, J. S., Wickes, A. C., Parmar, B. L., & de Colle, S. (2010). Stakeholder theory. The state of the art. Cambridge: Cambridge University Press.

    Book  Google Scholar 

  • Gauthier, D. (1986). Morals by agreement. Oxford: Clarendon Press.

    Google Scholar 

  • Gond, J. P., Palazzo, G., & Basu, K. (2009). Reconsidering instrumental corporate social responsibility through the Mafia Metaphor. Business Ethics Quarterly, 19, 57–85.

    Article  Google Scholar 

  • Graafland, J. J. (2002). Profits and principles: Four perspectives. Journal of Business Ethics, 35(4), 293–305.

    Article  Google Scholar 

  • Gunningham, N., Kagan, R. A., & Thornton, D. (2004). Social license and environmental protection: Why businesses go beyond compliance. Law & Social Inquiry, 29(2), 307–341.

    Article  Google Scholar 

  • Hampton, J. (1993). Contractarianism. In R. Goodin & P. Pettit (Eds.), A companion to contemporary political philosophy. Oxford: Blackwell.

    Google Scholar 

  • Hennchen, E. (2015). Royal dutch shell in Nigeria: Where do responsibilities end? Journal of Business Ethics, 129(1), 1–25.

    Article  Google Scholar 

  • Hume, D. (1758). Essays. Moral, political and literary. Indianapolis: LibertyClassics. (1985).

    Google Scholar 

  • Idemudia, U. (2009). Oil extraction and poverty reduction in the Niger Delta: A critical examination of partnership initiatives. Journal of Business Ethics, 90(Supplement 1), 91–116.

    Article  Google Scholar 

  • International Finance Corporation. (2010). Strategic community investment: A good practice handbook for companies doing business in emerging markets. Retrieved July 25, 2015, from http://www.ifc.org/wps/wcm/connect/Topics_Ext_Content/IFC_External_Corporate_Site/IFC+Sustainability/Learning+and+Adapting/Knowledge+Products/Publications/

  • Jones, T. M. (1995). Instrumental stakeholder theory: A synthesis of ethics and economics. Academy of Management Review, 20(2), 404–437.

    Google Scholar 

  • Kagan, R. A., Gunningham, N., & Thornton, D. (2003). Explaining corporate environmental performance: How does regulation matter? Law & Society Review, 37(1), 51–90.

    Article  Google Scholar 

  • Kant, I. (1788). Kritik der praktischen Vernunft. Frankfurt: Suhrkamp. (1996).

    Google Scholar 

  • Kant, I. (1793). Über den Gemeinspruch: Das mag in der Theorie richtig sein, taugt aber nicht für die Praxis. In I. Kant, Kleinere Schriften zur Geschichtphilosophie, Ethik und Politik [ed.by K. Vorländer]. Hamburg: Felix Meiner.

  • Koivurova, T., Masloboev, V., Hossain, K., Nygaard, V., Petrétei, A., & Vinogradova, S. (2015). Legal protection of sami traditional livelihoods from the adverse impacts of mining: A comparison of the level of protection enjoyed by sami in their four home states. Arctic Review on Law and Politics, 6(1). Retrieved July 25, 2015, from http://arcticreview.no/index.php/arctic/article/view/76

  • Luetge, C., Armbrüster, T., & Müller, J. (2016). Order ethics: Bridging the gap between contractarianism and business ethics. Journal of Business Ethics. doi:10.1007/s10551-015-2977-6.

    Google Scholar 

  • Lynch-Wood, G., & Williamson, D. (2007). The social licence as a form of regulation for small and medium enterprises. Journal of Law and Society, 34(3), 321–341.

    Article  Google Scholar 

  • Melé, D., & Armengou, J. (2016). Moral legitimacy in controversial projects and Its relationship with social license to operate: A case study. Journal of Business Ethics. doi:10.1007/s10551-015-2866-z.

    Google Scholar 

  • Matejek, S., & Gössling, T. (2014). Beyond legitimacy: A case study in BP’s ‘‘Green Lashing’’. Journal of Business Ethics, 120, 571–584.

    Article  Google Scholar 

  • Meyer, J. W., & Rowan, B. (1977). Institutionalized organizations: Formal structure as myth and ceremony. American Journal of Sociology, 83, 340–363.

    Article  Google Scholar 

  • Meyer, J., & Scott, R. (1983). Centralization and the legitimacy problems of local government. In J. Meyer & R. Scott (Eds.), Organizational environment: Rituals and rationality (pp. 199–216). Newbury Park: Sage.

    Google Scholar 

  • Mitchell, R. K., Agle, B. R., & Wood, D. J. (1997). Toward a theory of stakeholder identification and salience: Defining the principle of who and what really counts. Academy of Management Review, 22(4), 853–886.

    Google Scholar 

  • Moffat, K., & Zhang, A. (2014). The paths to social licence to operate: An integrative model explaining community acceptance of mining. Resources Policy, 39, 61–70.

    Article  Google Scholar 

  • Morrison, John. (2014). The social license to operate. How to keep your organization legitimate. New York: Palgrave MacMillan.

    Google Scholar 

  • Murillo, D., & Vallentin, S. (2016). The business school’s right to operate: Responsibilization and resistance. Journal of Business Ethics. doi:10.1007/s10551-015-2872-1.

    Google Scholar 

  • Néron P.-Y. (2016). Rethinking the ethics of corporate political activities in a post-citizens united era: Political equality, corporate citizenship, and market failures. Journal of Business Ethics. doi:10.1007/s10551-015-2867-y.

    Google Scholar 

  • Nielsen, A. E. (2013). License to operate. In S. O. Idowu, N. Capaldi, L. Zu & A. Das Gupta (Eds.), Encyclopedia of corporate social responsibility (pp. 1585–1591). Berlin: Springer.

  • O’Donohue, W., & Nelson, L. (2009). The role of ethical values in an expanded psychological contract. Journal of Business Ethics, 90(2), 251–263.

    Article  Google Scholar 

  • Palazzo, G., & Scherer, A. (2006). Corporate legitimacy as deliberation: A communicative framework. Journal of Business Ethics, 66(1), 71–88.

    Article  Google Scholar 

  • Phillips, R., Freeman, R. E., & Wicks, A. C. (2003). What stakeholder theory is not. Business Ethics Quarterly, 13(4), 479–502.

    Article  Google Scholar 

  • Pike, R. (2012). The relevance of social licence to operate for mining companies. In Schroders social license to operate research paper. http://www.schroders.com/staticfiles/schroders/sites/Americas/US%20Institutional%202011/pdfs/Social-Licence-to-Operate.pdf. Accessed 25 July 2015

  • Prno, J., & Slocombe, D. S. (2012). Exploring the origins of ‘social license to operate’ in the mining sector: Perspectives from governance and sustainability theories. Resource Policy, 37, 346–357.

    Article  Google Scholar 

  • Ruggie, J. (2013). Just business. Multinational corporations and human rights. New York: W.W. Norton & Company.

    Google Scholar 

  • Russell, C., Russell, D., & Honea, H. (2016). Corporate social responsibility failures: How do consumers respond to corporate violations of implied social contracts? Journal of Business Ethics. doi:10.1007/s10551-015-2868-x.

    Google Scholar 

  • Suchman, M. C. (1995). Managing legitimacy: Strategic and institutional approaches. Academy of Management Review, 20, 571–610.

    Google Scholar 

  • Thomson, I., & Boutilier, R. G. (2011). Social license to operate. In P. Darling (Ed.), SME mining engineering handbook (pp. 1779–1796). Littleton, CO: Society for Mining, Metallurgy and Exploration.

    Google Scholar 

  • Voegtlin, C., Patzer, M., & Scherer, A. G. (2012). Responsible leadership in global business: A new approach to leadership an its multi-level outcomes. Journal of Business Ethics, 105, 1–16.

    Article  Google Scholar 

  • Waxenberger, B., & Spence, L. (2003). Reinterpretation of a metaphor: From stakes to claims. Strategic Change, 12(5), 239–249.

    Article  Google Scholar 

  • Wilburn, K. M., & Wilburn, R. (2011). Achieving social license to operate using stakeholder theory. Journal of International Business Ethics, 4(2), 3–16.

    Google Scholar 

  • Wood, D. J. (1991). Corporate social performance revisited. Academy of Management Review, 16(4), 691–718.

    Google Scholar 

  • Yates, B., & Horvath, C. (2013). Social license to operate: How to get it, and how to keep it. In Summit working paper. Pacific Energy Summit.

  • Zandvliet, L., & Anderson, M. B. (2009). Getting it right: Making corporate–community relations work greenleaf publishing limited. UK: Sheffield.

    Google Scholar 

Download references

Author information

Authors and Affiliations

Authors

Corresponding author

Correspondence to Geert Demuijnck.

Rights and permissions

Reprints and Permissions

About this article

Verify currency and authenticity via CrossMark

Cite this article

Demuijnck, G., Fasterling, B. The Social License to Operate. J Bus Ethics 136, 675–685 (2016). https://doi.org/10.1007/s10551-015-2976-7

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10551-015-2976-7

Keywords

  • Social license to operate
  • Social contract theory
  • Legitimacy
  • Pragmatic legitimacy