Research by the University of Melbourne has found the concept of a social licence to operate is “purely metaphorical” and is negatively impacting both mining companies and the communities in which they operate.
According to public policy analyst Dr Sara Bice, who penned the report, What Gives You A Social Licence?, Australian mining companies are employing debatable and ill-defined concepts of a social licence to justify their presence in local communities.
"Mining companies are increasingly claiming to have a 'social licence' to operate in certain areas because of perceived benefits to the local community," Bice said.
"But claims to this 'licence' are misleading because the term isn't formally defined anywhere in law," she said.
The study examines how mining companies — including BHP Billiton, Rio Tinto and Xstrata— conceptualise and define their own "social licence", and voices concerns about how these "licences" are applied in practice.
Bice said a traditional licence involves one party empowering another based on certain conditions and responsibilities, however she says issue arise because these criteria are not based around formal regulations.
"The language of licensing leads to confusion. It suggests a formality, and even regulation, which does not exist. In reality, a 'social licence' is purely metaphorical,” she said.
Bice argues both parties would benefit from greater clarity.
For mining companies this would mean greater definiteness around what their social licence entails, which in some cases would help ward off the ‘vocal minority' who oppose their operations.
While for local communities, Bice says regulation would ensure big corporations cannot claim to be meeting a set of minimum standards that have not been set.
The report said clarity can be achieved by bridging the gap between theories of a social licence and how they are actualised with more apparent and measurable indicators.
It states this would require mining companies to better capture social data, be more transparent in payments made to government and set out clearly definable indicators against which stakeholders can make their own judgements.
It said as well as reporting on environmental and employment issues, reporting on social issues could “be improved by more precisely linking this information back to establishment and maintenance of a social licence”.
“While the concept of a social licence is most certainly deemed important by companies, it remains unclear exactly how companies determine whether they have garnered a licence,” the report states.
“Clearly, much work remains to be done before resources companies may confidently answer the question, “What gives you a social licence?”