Imagine a world where profits don’t matter. A business landscape where success is not measured by financial gain alone, but by their impact on people and our planet. We’re not talking about some kind of utopia here — this is the direction businesses are now headed. The spotlight is now firmly on sustainability, both in terms of environmental and social impacts.
The concept of a ‛Social Licence to Operate’ (SLO) has rapidly moved from the periphery of corporate consciousness into the boardrooms of industry heavyweights.
While an SLO might give rise to an image of an actual licence, the meaning runs much deeper. An SLO signifies that the stakeholders accept a company’s business practices, particularly those directly affected by their operations. While companies don’t have to comply by law, the SLO is an intangible trust contract that businesses earn through responsible conduct, positive interactions, and successful stakeholder engagement.
How are SLOs defined?
There are three levels to the SLO. These reflect the degree of community acceptance:
- Legitimacy — this initial level requires businesses to comply with regulations and demonstrate ethical conduct. Companies must respect local customs and values to earn legitimacy.
- Credibility — this level requires open, transparent, and honest communication between the company and its stakeholders. Building credibility involves fostering a two-way dialogue.
- Trust — the highest level of SLO is achieved when stakeholders have complete faith in a company’s actions. This requires consistent and reliable action over time to cultivate trust.
What can happen if companies don’t operate responsibly?
Ignoring an SLO can have a major impact. Take the case of mining giant, Rio Tinto, in 2020 — despite having legal permission, they destroyed the 46,000-year-old Juukan Gorge caves in Western Australia. These caves were sacred to the local Indigenous people; by destroying them, Rio Tinto suffered substantial damage to their reputation, financial loss, and executive resignations.
This kind of fallout underscores the importance of an SLO in modern business practice.
Conversely, companies with an established SLO find themselves reaping substantial benefits. A good example is Google’s parent company, Alphabet, who earned a solid SLO through their commitment to renewable energy, privacy, and ethical AI research. This isn’t to say that companies operating without a strong SLO can’t be profitable in the short term. Amazon, for instance, continues to generate remarkable profits, despite facing criticism for working conditions and other issues.
However, there’s a significant difference between short-term profitability and long-term sustainability. Operating without a robust SLO can lead to long-term reputational damage, potential regulatory challenges, and decreasing trust among consumers and employees. While profits can be achieved in the short run, the lack of a solid SLO can risk future growth, stakeholder trust, and the ability to adapt to an ever-evolving socio-economic landscape.
Key indicators that you have a SLO
These key indicators set apart businesses that have a strong SLO:
- Active stakeholder engagement — the robustness of an SLO is often directly proportional to the degree of stakeholder engagement. When stakeholders are actively involved in dialogue with key members, decision-making processes, or even in co-creating solutions, it demonstrates more than just passive acceptance. It signifies that they believe in the company’s direction and practices.
- Public sentiment and reputation — a company’s standing within the community is intricately woven into its Social Licence to Operate. But this reputation isn’t just built on advertising or corporate statements; it’s a reflection of real-world experiences and perceptions. A company with frequent positive media coverage, endorsements from respected figures, and a strong online presence marked by supportive customer feedback, is likely enjoying a strong SLO.
- Resistance or support for operations — how a local community responds to a company’s activities can often paint a clearer picture of its SLO than any corporate report. When a community actively champions a company’s initiatives, perhaps by endorsing their projects or collaborating in local events, it’s a sign of deep-rooted trust and support.
- Employee satisfaction and retention — the pulse of a company’s SLO can often be gauged by listening closely to its heartbeat — its employees. A workforce that is satisfied, motivated, and committed to the company’s mission and values doesn’t merely contribute to operational success; it’s also a testament to a culture that respects and values its people. When employees are proud of where they work, they become brand ambassadors, enhancing the company’s reputation in their own communities and networks.
- Customer loyalty — a company’s SLO is intricately tied to how its customers perceive its values, ethics, and impact. When customers believe in a company’s mission and feel aligned with its purpose, they are more likely to remain loyal, even when faced with competitive alternatives. This loyalty is not just about purchasing products or services; it extends to brand advocacy, where customers actively champion the company within their own circles, amplifying its reputation.
Securing a social licence is not a one-time achievement, it’s an ongoing, dynamic process. By staying aware of current trends and public concerns, businesses can both maintain and enhance their social licence. Respecting and addressing the expectations of your stakeholders is key, as are taking positive steps to integrate sustainability into your business strategy. These actions not only strengthen your social licence, they are the foundation for your business’s growth, stakeholder trust, and overall value to society.
Businesses can’t afford to be pure profit generators anymore. The global crises that we currently face mean that people expect much more. If companies are serious about the economic, social, and environmental impacts of their operations, the payback isn’t just a bonus accolade. Positive action over time can create a virtuous cycle of trust that sustains your business’s growth.
Author: Ryan Gillies, CT: Evolve
