What is social licence and why should it affect the way you communicate with stakeholders?

Social licence, also known as social licence to operate, is the concept that members of society implicitly grant organisations permission to operate within communities. At its foundation is the idea that an organisation is responsible for more than shareholder profits or member interests. It should take into consideration its effect on all stakeholders – everyone its work touches or influences.

It’s an evocative metaphor.

Like a fishing licence, social licence is not something that can be “self-awarded”. So says John Morrison, the executive director of the Institute for Human Rights and Business.

It also can’t be bought. Like a driver’s licence, you can’t just pay for it; your skill, knowledge, and behaviour all play a significant part in whether you get to retain it. Nor can the expectations inherent to social licence be offset in the way that, say, carbon pollution can be. Theoretically, at least, an organisation can’t say “We’ll continue to ignore this public concern, but that’s OK because we’ve bought credits”.

In truth, though, there’s no official or universally adopted definition for the term. But one of the best interpretations comes from the Australian not-for-profit organisation, The Ethics Centre.

They say that social licence comprises three components:

Legitimacy

“This is the extent to which an individual or organisation plays by the ‘rules of the game’. That is, the norms of the community, be they legal, social, cultural, formal or informal in nature.”

Trust

“This is the willingness to be vulnerable to the actions of another. It is a very high quality of relationship and takes time and effort to create.”

Credibility

“This is the individual or company’s capacity to provide true and clear information to the community and fulfil any commitments made.”

In this article, we’ll talk about all three, but focus predominantly on credibility, and how an organisation might strengthen its social licence by concentrating on the truth and clarity of its information.

Why social licence to operate matters for not-for-profits in particular.

So that’s a bit of the theory. But how does social licence affect organisations in practice?

It really depends.

For a huge organisation with enormous economic and political influence, members of society who may want to ‘revoke’ the licence are unlikely to have that power. Equally, those with the ability to change the terms of the licence, or cancel it, often have incentives not to. If a very large mining company were to, for example, destroy a 30,000 year old site of enormous cultural significance, they might be censured. There might even be high-level resignations. But their existence would never be under threat.

For an organisation without as much influence, and with higher social expectations – and many not-for-profits fall into that category – social licence is arguably far more important.

For a start, a not-for-profit will almost certainly not have the economic and political clout of a huge commercial company. The too-big-to-fail backstop simply doesn’t exist for the vast majority.

Just as significantly, if it’s an organisation that relies on public donations, having its reputation called into question can pose an existential threat. As potential donors begin to wonder whether Charity X is living up to the reasonable expectations of society, they may begin to withhold donations. And if enough do that, what the organisation faces is far more than an inconvenience.

Now, that may all sound a little bit bleak. And it’s true that social trust in institutions is declining around the world – and has been for some time.

According the Edelman Trust Institute’s Trust Barometer, Australia isn’t immune to what’s sometimes referred to as “the crisis of trust”. And while NGOs are generally more trusted than government, business, or the media, the difference isn’t large enough to declare them a statistical outlier.

But it’s not all bad news.

When you’re aware of a risk, you can take steps to mitigate against it. And, as a report from the Australian Institute of Company Directors and KPMG says, “Boards are increasingly looking to better understand, and respond to, the issues that are affecting their organisation’s trustworthiness.”

Using communication to strengthen your social licence.

So, what steps can not-for-profit organisations take to retain, and improve, the trust of the public?

There are many. And one of the problems brought about by the “crisis” is a question of what, among a whole range of measures and variables, is best to concentrate on.

As the Australian Institute of Company Directors and KPMG report put it, “The factors contributing to trust are more dynamic and interrelated than ever before. There are simply too many issues to address them all with the same level of focus; boards must prioritise and focus on those that are most likely to impact their organisation and its stakeholders.”

It’s not a matter for boards alone, however.

At the conclusion of Edelman’s summary of its 2022 Trust Barometer, was this statement:

“The importance of quality and reliable trustworthy information cannot be overstated… Providing ‘quality information’ was found to be the number one most powerful trust builder [including for NGOS].

A governance team might oversee the quality of an organisation’s information, but practical responsibility for that data and how it’s presented lies with professional marketers and communicators.

Now, if you’re going to concentrate on quality information – and we think you should – it’s important to determine what quality actually look like.

How?

We’ll explain by using an annual report as an example.

As we mentioned in this article, stakeholders expect much from such a report. They see it as an expression of an organisation’s performance, as a single source of reliable information on the organisation as a whole, as well as its year just gone.

They may not want it to be 100 pages long, but they expect it to be comprehensive, or at least to mention all relevant financial details, achievements, activities, and progress on work or goals.

They also expect to be able to read the parts relevant to them without hindrance. This is where “quality” becomes critical. If the information is hard to find, omits important details, or is filled with jargon, it may fall short.

However, even if it’s available at the press of a digital button, fully transparent, and beautifully written, it can’t be considered truly good information if it’s accessible only to a few.

One assumption no organisation can afford to make is that everyone reads in roughly the same way. That’s simply not the case.

To make the example of an annual report even more specific, let’s consider Guide Dogs Australia. They know better than most that people with low vision and blindness access information in a totally different way to people with typical vision. And so accessibility has been a central concern as they’ve developed and refined their digital annual reports.

But an NFP doesn’t need to be in the field of vision services to make accessibility a priority. Those who determine the legitimacy of an organisation’s social licence have a variety of different cognitive and physical abilities; accounting for this improves the quality of your communication. That increases credibility and so strengthens your social licence.

And if potential ‘gains’ seem marginal, consider that those who donate regularly and reliably to NFPs in Australia are on average significantly older. And older people are much more likely to approach an annual report (or any piece of digital communication) with different accessibility needs.

Clarity is as important as truth.

Social licence is not just a theoretical concept that boards need to reckon with. It’s a practical concern, and intimately connected with communication.

Honesty and disclosure of relevant information are utterly essential if an NFP wants to maintain legitimacy and credibility in the eyes of the public. Good information demonstrates that you abide by the law, that you adhere to social and cultural mores, that you’re meeting social expectations. It articulates how you’re fulfilling your commitments.

But all this is rendered academic if a large number of potential readers can’t access that information in the first place.

When you take measures to make your most important information available and accessible to as many people as possible, you increase transparency. More people can get an understanding of your cause, your work, and your achievements.

In the process, trust increases and your social licence – that implicit permission granted by all members of society – is strengthened.