Building competitive advantage: the business case for social licence to operate
E. Lunsford A , D. Snashall A , M. Haddon A , L. Edgell A and S. McCrea AERM.
The APPEA Journal 52(2) 689-689 https://doi.org/10.1071/AJ11103
Published: 2012
Abstract
A social licence to operate and reputational capital, contrary to common perception, are not simply the green arm of philanthropy. Rather, they are multi-dimensional and intrinsically linked to a corporation’s market value in time. Corporations benefit from a full understanding of the business case for comprehensive and leading-edge strategies to manage and build reputational capital, thus ensuring long-term social licence to operate.
A reputational capital typically represents about 80% of a firm’s intangible assets. Further, global markets demonstrate a preference for corporations that institutionalise sustainability. More than ever, in today’s operating environment, corporations have a significant market opportunity to benefit from making enterprise and project-level decisions based on the balance of social, environmental, and economic capital.
This extended abstract explores the specific activities that contribute to and degrade reputational capital, and ultimately, a corporation’s social licence to operate. More specifically, how risk management, HSE (health, safety, and environment) performance, impact assessment, the safety case, organisational culture, and asset management are inextricably linked to community risk and ultimately a social licence to operate. Each of these elements have the potential to build reputational capital such that access to key markets, cost of capital, and project net present value (NPV) are optimally advantaged.
It is understood within the oil and gas industry that informed business strategies that can be acted on are made more difficult because of the challenging nature of a social licence to operate and community risks. To this end, the authors aim to introduce a community risk-assessment tool and methodology, which can be implemented at the enterprise or project-specific level.
Liz Lunsford is a sustainability strategy consultant based in ERM’s Houston office. She has worked on sustainable business case design, quantifying the value of sustainability, and designing performance optimisation strategies across oil and gas, mining, power, pulp and paper, chemicals, and aerospace industries in North America, Europe, and West Africa. |
David Snashall is ERM’s commercial director for Asia Pacific. He was managing director ERM ANZ and global practice managing partner for impact assessment and planning. He has more than 25 years of experience in the planning and approvals for major projects across Australia, Asia, and other parts of the world. He has assisted companies including Chevron, ExxonMobil, BG, Woodside, BP, BHP, Rio Tinto, and Origin to manage the environmental and social aspects of project development, execution, and operations. |
Matt Haddon leads ERM’s global strategic and transformation consulting practice—blending business and technical consulting knowledge at senior levels in ERM’s major clients, across the energy and mining sectors. His particular knowledge lies in bridging between operational performance and executive leadership to integrate non-technical risk into everyday business success. |
Linden Edgell is ERM’s global sustainability program director with more than 20 years of experience in stakeholder engagement, social and strategic assessments, and advising governments and companies about obtaining and maintaining their social licences to operate. She has worked in both the government and private sectors, as well as involvement in NGOs at a national and international level. She has worked on many of the largest major extractive projects in Australia and globally. |
Sam is the team leader of ERM’s social consulting practice based in Perth, Australia. Having more than 10 years of consultancy experience, she specialises in social and health impact assessment, social management and investment planning, and stakeholder consultation. She has extensive experience working in the CSR sector; specifically with oil and gas majors. She has led numerous multi-disciplinary teams conducting social assessments and management activities as part of the WA, NT, and commonwealth approvals processes in Australia, as well as across Asia Pacific. She has a solid understanding of industry and international best practices in CSR such as the IFC performance standards and has worked extensively with companies seeking to obtain their social licences to operate. |
References
Epstein, M. J., and Roy, M. J. (2001). Sustainability in action: identifying and measuring the key performance drivers. Long Range Planning 34, 585–604.Goldman Sachs., 2010—280 projects to change the world. January 15, 2010. Accessed 15 January 2010. <http://www.goldmansachs.com>.
Jacobson, M., 2011—One year later, where does BP stand? Accessed 26 April 2011. <http://www.pbs.org/newshour/rundown/2011/04/bp----one-year-later.html>.
Jojarth, C., 2008—The end of easy oil: estimating average production costs for oil fields around the world. CDDRL Stanford Working Papers, 81, March.
Merrow, E.W., 2011—Industrial megaprojects: concepts, strategies and practices for success. USA: John Wiley & Sons.
Smaiziene, I., and Orzekauskas, P. (2009). Reputational crisis: saving the most valuable a company’s asset. Economics & Management 14, 522–28.
Thornton, G., 2010—The implications of the April 2010 oil spill on deepwater exploration and production. Accessed December 2010. <http://www.gt.com/staticfiles/GTCom/Advisory/Restructuring%20and%20turnaround/White%20paper%20gulf%20oil%20spill.pdf>.
