Social License to Operate: Reducing Non-Technical Risks Around Major Infrastructure Projects

By: Ian Herbison, CEO at Speyside Group 

For all the talk of ESG, it is still common that when planning and delivering large-scale infrastructure projects insufficient attention is paid to social, political, and environmental risks.

A Spotlight on Oil and Gas Megaprojects study, published by EY, concluded that 64% of megaprojects in the mining and energy sectors may experience cost overruns, and 73% may experience delays in their estimated delivery time due to non-technical risks. This is a big issue.

That is why it is crucial to understand the attitudes and agendas of all relevant stakeholders, structure dialogue, and plan to get ahead of the big issues and risks. In other words, in addition to focusing on securing a technical license to operate, one must secure a social license to operate.

What Is Social License to Operate?

A social license to operate is an unwritten contract between a company and its stakeholders where the company commits to take the necessary measures to mitigate negative project impacts, and share project benefits, in return for support.

At Speyside, we adopt a step-by-step approach to achieving this, which includes a deep contextual analysis, stakeholder mapping and consultation that results in a strategy and action plan that is effective, affordable, and sustainable over the lifecycle of a project.

It is important to emphasize that when community support for a project is based purely on financial or in-kind donations, without addressing the real needs, wants and concerns of stakeholders there is a risk that more and more donations will be required, which will lead to delays and cost overruns and undermine the project. It is essential to move beyond the transactional when seeking social license.

During a project’s development, it is of course possible to lose your social license due to non-compliance with agreements made. However, it is also possible to deliver all commitments but be let down by a lack of clear stakeholder communication.

Therefore, it is essential that mining and energy megaprojects have an active communications strategy in which a narrative is built to highlight a responsible approach and project benefits while firmly rebutting issues and unjustified attacks.

Just as technical risks are identified and counteracted in the structuring of a project, it is equally important to do the same with non-technical risks because they have a real and measurable impact in delivering a project on-time and to budget.