OGEL 1 (2020) -Social Licence to operate (SLO) in the Extractive and Energy Sectors - Introduction

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)Editorial Preface

View graph of relations

Author(s)

Detail(s)

Original languageEnglish
Number of pages10
Journal / PublicationOil, Gas & Energy Law Intelligence (OGEL)
Volume18
Issue number1
Publication statusPublished - Jan 2020

Abstract

The concept of social licence to operate (SLO, simply ‘social license’ or ‘social licensing’) originated in the mining industry and its use has also been extended over large infrastructure, energy, and industrial projects. In simple terms, the SLO refers to: 1) “the ongoing acceptance of a company or industry's standard business practices and operating procedures by its employees, stakeholders and the general public” (Investopedia 2018), and 2) “the level of acceptance or approval by local communities and stakeholders of mining companies and their operations.” (Fraser Institute 2012). Specifically in the mining sector, the SLO can be summarised as attempts to “to secure the acceptance of mining activities by local communities and stakeholders, in order to build public trust in their activities and prevent social conflict” (IRP UNEP 2017) whereas such attempts “are premised on engagement between mining companies, governments and civil society to ensure that mineral resource extraction contributes to nation¬al and local development, and that damaging impacts on host communities and the environment are mitigated or otherwise managed” (ibid.).

The need of the developers/investors to obtain the SLO stems from the “the demands on and expectations for a business enterprise that emerge from neighbourhoods, environmental groups, community members, and other elements of the surrounding civil society” (Gunningham, Kagan, Thornton 2014). In turn, from the perspective of developers/investors, the SLO is “a pragmatic calculation of what is required to minimise business risk and win the degree of community support required to avoid delay or disruption to company operations” (Owen, Kemp 2013). The SLO is based on some agreement between developers/investors and stakeholders/the community and can take a form of 1) “an informal agreement that infers ongoing acceptance of an industrial or energy project by a local community and the stakeholders affected by it” (Gallois, Ashworth, Leach, Moffat 2017) or 2) “a form of unwritten social contract that exists between companies and communities” (Lacey, Lamont 2014)

The lawmakers can assist with the development of agreements for SLO through procedural empowerment of various stakeholders such as by securing 1) access to environmental information, 2) public participation in environmental law making, strategic impact assessment (SEA) or project-specific environmental impact assessment (EIA), and 3) related administrative and judicial review procedures. Moreover, within the framework of sector-specific corporate-social-responsibility (CSR) / Triple Bottom Line (TBL) activities, developers/investors also seek to secure wider SLO going beyond pure compliance for a number of reasons such as a desire to avoid boycott, or a belief that downplaying such expectations would eventually lead to the adoption of stricter regulation (Gunningham, Kagan, Thornton 2014). Indeed, to quote Curran, “[i]n an age of CSR, social licence thus acts as a form of strategic risk management for most major companies. Its objective is to protect companies’ financial and reputational assets by proactively anticipating and managing contestation rather than simply reacting to it.” (2017).

Obtaining SLO in relation to the extraction of hydrocarbons and electricity generation is more relevant than ever. On a global scale, the public awareness concerning the impact of new investments and ongoing operations in those sectors on the environment, climate and quality of life of affected communities is constantly increasing, whereas we remain as far as ever from phasing out conventional fuels: about 1160 new coal power plants (CPP) and about 50 nuclear power (NPP) are currently planned or being constructed (Global Coal Plant Tracker 2020; World Nuclear Association 2020). At the same time, the push towards the electrification of the automotive industry predicts massive expansion of mining projects in response to a growing demand for elements used in the production of batteries.

The angles, from which the controversies surrounding the SLO can be looked at, are numerous. Foremost, specific sectors can be analyzed in terms of SLO, including 1) prospection, exploration and extraction (upstream) of hydrocarbons, 2) electricity and heat generation, 3) linear investment such as such oil and gas pipelines (midstream) or high voltage electricity transmission grid with emphasis on cross-border interconnectors, and 4) underground storage of gas, oil and CO2. Secondly, SLO can be looked at in terms of the involvement of public authorities in the social licensing process, including 1) the legislative works with regard to laws affecting above-listed sectors, 2) the preparation of various plans, programs and/or strategic environmental assessment (SEA) which cover the above-listed sectors, and 3) Environment Impact Assessment (EIA) of specific projects in the above-listed sectors.

Thirdly, SLO can be examined through the prism of procedural empowerment of stakeholders, including 1) access to information such as on the progress of the SLO-related legislative process and/or project-specific environment-related information, 2) public participation in the legislative process, preparation of environment-related plans and programmes, the SEA, the EIA, 3) related administrative and judicial review procedures, 4) the duty to obtain free, prior and informed consent (FPIC) from indigenous communities, and 5) consultation with indigenous communities in relation to law and plan making. The procedural empowerment of stakeholders also ties to how property rights and taxation revenue are allocated among investors and affected stakeholders, including 1) separation of right to deposits between treasuries and land holders, 2) distribution of royalties between treasuries and landholders, 3) contractual arrangements between developers/investors and landholders, 4) expropriations and compensation, and 5) specific tort regimes in the mining and nuclear sectors. Finally, SLO can also be looked at from the perspective of who imposes SLO-related requirement, including 1) major multilateral developments banks (MDBs), 2) sub-regional MDBs, 3) national development banks/agencies of major donors, or 4) domestic laws in specific jurisdictions.

In the course of this project running throughout 2019, we have gathered the following contributions partially addressing the above-mentioned phenomena, and we have grouped these into sections of this special issue related to 1) conceptualization of the SLO, 2) intersections between SLO and protection of investment, 3) regional perspectives, 4) case and sector studies, 5) outer space, and 6) one book review.