Social license to operate and social impact assessment

From tea and coffee to cotton to cobalt, there is growing public interest and scrutiny around the impact, whether that be environmental or social, of today’s global supply chains.

The Samarco dam disaster: A grave challenge to social license to operate discourse – Demajorovic et al

Differentiated social risk: Rebound dynamics and sustainability performance in mining – Kemp et al. 

Adapting social impact assessment to address a project’s human rights impacts and risk – Esteves et al

The Social Licence to Operate: Ambiguities and the neutralization of harm in Mongolia – Marieke Evelien Meesters & Jelle Hendrik Behagel


From tea and coffee to cotton to cobalt, there is growing public interest and scrutiny around the impact, whether that be environmental or social, of today’s global supply chains.

Various initiatives, including Fairtrade and MSC Certified, are well recognised and help consumers to make purchase decisions factoring in ethical and impact considerations. However, when it comes to other equally crucial supply chains, including mining, there is no such blanket certification frameworks in place. Rather, these companies are expected to adhere to a more ambiguous Social License to Operate (SLO) model. Yet, this approach is widely contested and critiqued.


When SLO Fails

The nature and utility of the SLO concept has been the focus for several recent studies. The first, from Demajorovic et al, focuses on the Samarco dam disaster which brought sharp focus on certain mining practices, and casts doubt on whether a company should have licence to operate when the human and environmental risks tragically proved to be so high.

More broadly, the authors note that SLO is becoming increasingly prominent in the discourse of the mining sector as a central element of corporate responsibility strategy to minimize the risks to business. They suggest that the central concept of SLO, that the community can give or withhold support for a project, demands a critical eye. This is because the legitimacy of mining activities is not always achieved by the surrounding community’s effective evaluation of the benefits and risks of these ventures.

Demajorovic et al conclude that understanding what is underneath the SLO achieved by companies can help to clarify why social risks are not always translated into actions. Furthermore, companies should encourage and strengthen the socio-institutional environment, to make communities more resilient. In the case of Samarco, they suggest that high levels of social acceptance may have hidden risks to community and business itself.


Human Rights and Negative Social Impacts

For Esteves et al, there is an inherent weakness in the social risk assessments undertaken for business, especially in the extractive industries. In contrast to the conventional approach that considers consequence to the company rather than to impacted communities, conformance with the United Nations Guiding Principles on Business and Human Rights requires that consequence to affected communities has precedence.

By taking human rights impacts into account and using the dimensions of gravity, extent, vulnerability and remediability, the authors put forward novel criteria to assess the significance of negative social impacts.

They argue that for social risks to be properly assessed, companies need to know and understand the human rights impacts of their activities; contemporary approaches to project impact and risk assessment need to be adapted to consider human rights; and environmental impact assessment (EIA) and social impact assessment (SIA) methods need to be adapted to give greater attention to impacts on human rights.


Moving Beyond Corporate Risk Management

Kemp et al note that risk has become a central management concept in mining to the extent that risk is now assessed across almost every aspect of the business. Business, financial, legal, enterprise, reputational, and project risk are all prominent risk categories. Mining companies rate potential risks and their severity in risk matrices that utilise a posteriori knowledge of past events to provide predictions of their future occurrence.

The authors suggest that the heightened attention that has been paid to terrestrial mining’s harm-generating and adverse social impacts has been pivotal in terms of encouraging the industry to take more responsibility for understanding and managing these effects. Without community opposition, companies are often unresponsive to concerns about particular risks. Yet, social opposition is not always the best indicator of whether harm is present or imminent.

In their study, which explores SLO in the context of mining operations in Mongolia, Meesters and Behagel argue that SLO raises ethical questions about the desirability of changing social and environmental realities for the purpose of economic development.

For example, they ask, is it acceptable to divert a river in order to free up capital for the exploitation of larger areas? What would be the economic cost of avoiding the river diversion? The central focus on economic gains with regard to both mining operations and the SLO confirms critiques that the SLO is often limited to ensuring economic gains for local communities and overlooks broader environmental and social harm.