Why is Social License to Operate Important?
Social License to Operate as the Foundation of Good Relations with the Community emphasizes that companies that understand why Social License to Operate is important will find it easier to build long-term trust.
The existence of a company within society does not only depend on formal permits from the government, but also on social acceptance. This is known as the Social License to Operate (SLO), an unwritten social contract in which the community provides legitimacy and support so that companies can operate peacefully and sustainably.
Case Study of SLO:
A study in Dese Mekarsari, District X, tried to measure the level of community acceptance of companies operating in their area using the SLO approach.
The research method used questionnaires to 30 key stakeholders (village officials, BPD, fishermen groups, youth, women, SMEs, and community leaders) and was followed by in-depth interviews.
The results showed that the average SLO score was 3.51 or in the category of Acceptance / High Tolerance. This means that the community was willing to tolerate company operations, but this support was still temporary and unstable. There is potential for social unrest if the company fails to improve the quality of its relationship with the community.
Determinant Factors of Social License to Operate
Referring to the Thomson & Boutilier (2011) model, SLO can be improved through several important elements:
Economic Legitimacy The extent to which companies provide direct economic benefits, such as employment or the improvement of local businesses.
Socio-Political Legitimacy Contributions to the quality of life of the community, such as health, education, culture, and social justice.
Interactional Trust The company’s ability to respond to complaints, listen to aspirations, and maintain good relations with stakeholders.
Institutional Trust Transparency, community involvement in decision-making, and proportionality of CSR programs to the impacts caused.
Field Findings
Several weak points from the results of the study in the village are as follows:
Economic benefits are minimal: the community feels that local workers are not well accommodated.
Health and Education: facilities are limited, scholarships are difficult to access, and teachers are lacking.
Cultural preservation: the company’s contribution to traditional and cultural activities is still rare.
Communication: socialization of company activities and responses to community complaints are not yet optimal.
Local stakeholders, such as village heads, teachers, midwives, fishermen groups, and SMEs, highlighted the importance of improving the quality of CSR programs to be more relevant to the real needs of the community.
Recommendations for Companies
To increase community acceptance from mere tolerance to approval or even full trust, companies need to:
Increase the recruitment of local workers and community economic support, for example through assistance for fishermen’s equipment or the expansion of renewable energy programs (Solar Home System).
Strengthen social contributions in health, education, arts, culture, and religion.
Accelerate responses to community complaints and actively participate in village deliberation forums.
Increase transparency of information regarding both the positive and negative impacts of company activities.
Build CSR programs that are participatory and sustainable, not just ceremonial assistance.
Positive Impacts of Social License to Operate
When companies succeed in obtaining a strong Social License to Operate (SLO), many positive impacts can be felt by both the company and the community. One of them is operational stability. With community support, potential conflicts can be reduced, so that social and legal costs can be minimized.
In addition, SLO also provides reputational benefits. Companies that are able to demonstrate transparency, accountability, and real contributions tend to be more trusted by the public and more attractive to investors. On the other hand, communities also gain added value in the form of jobs, access to education, health, and economic empowerment programs.
A real example can be seen in several renewable energy companies that involve local communities in project development. From the beginning, they held village meetings, listened to aspirations, and provided direct job opportunities for residents. As a result, the community felt ownership of the project and fully supported it. This case clearly shows why Social License to Operate is important as a condition for creating mutually beneficial relationships.
With a strong Social License to Operate, companies not only maintain smooth operations, but also create shared value for society and the environment.
Source:
Swara, V. Y., & Simatupang, E. (2020). Keluar Dari Lingkaran CCSR: Corporate Social Entrepreneurship Dalam Menjawab Tantangan Sosial License To Operate. Jurnal Sinergitas PKM & CSR, 4(2), 195.