What is Social License to Operate?

What is Social License to Operate?

Social license to operate (SLO) refers to the ongoing, tacit acceptance and approval of a company's or project's activities by local communities, stakeholders, and the broader public. Unlike legal permits and regulatory approvals—which are granted by government authorities—social license is earned through trust, transparency, and demonstrated benefit to affected populations. The concept originated in the mining industry in the late 1990s, when companies discovered that regulatory approval alone was insufficient to prevent community opposition that could delay, disrupt, or permanently halt operations. Social license exists on a continuum from rejection to acceptance to approval to full identification with the project.

Why It Matters

The business case for social license is not theoretical—it is measured in billions of dollars of project value destroyed by community opposition. A 2014 study by researchers at the University of Queensland found that a major mining project without community support faces costs 2.5 to 10 times higher than projected due to delays, redesigns, legal challenges, and operational disruptions. The Dakota Access Pipeline, despite having regulatory permits, faced months of protests, international media attention, and a court-ordered shutdown that cost Energy Transfer Partners over $7 billion in construction delays and reputational damage.

The energy transition has amplified social license challenges rather than eliminating them. Renewable energy projects—wind farms, solar installations, transmission lines, lithium mines—face mounting community opposition. Germany's onshore wind buildout has slowed dramatically due to local resistance, with approval timelines stretching to 5–7 years. In the United States, over 300 local ordinances restricting renewable energy development were enacted between 2018 and 2024, according to Columbia University's Sabin Center. The irony is stark: the technologies essential to addressing climate change are being blocked by the communities expected to host them.

ESG frameworks have elevated social license from a project management concern to a governance-level issue. The SASB Materiality Map identifies community relations as material for 45 of 77 industries. The GRI Standards require disclosure on stakeholder engagement, grievance mechanisms, and community impacts. Investors increasingly evaluate social license risk as part of due diligence—recognizing that projects without community acceptance carry regulatory, legal, and reputational risks that can impair returns.

Social license is not a one-time achievement—it must be continuously maintained. Companies that earn trust through early engagement can lose it through a single incident of dishonesty, environmental harm, or broken commitment. The Deepwater Horizon disaster destroyed BP's social license in the Gulf Coast in hours, despite decades of operations and community investment. Maintaining social license requires ongoing transparency, responsive grievance mechanisms, and genuine accountability when things go wrong.

How It Works / Key Components

Social license theory identifies three levels: legitimacy, credibility, and trust. Legitimacy—the baseline—requires that the project conform to legal requirements and community norms. Credibility builds through consistent follow-through on commitments, transparent communication, and demonstrating competence. Trust—the highest level—emerges from ongoing relationships characterized by mutual regard and a shared sense of purpose. Projects that achieve trust-level social license can weather setbacks; those operating only at the legitimacy level are vulnerable to any triggering event.

Earning social license begins with stakeholder identification and engagement—before regulatory permitting, not after. Free, prior, and informed consent (FPIC), required for projects affecting indigenous peoples under ILO Convention 169 and the UN Declaration on the Rights of Indigenous Peoples, represents the most rigorous engagement standard. For non-indigenous communities, meaningful engagement means early contact, full information disclosure, genuine two-way dialogue, and incorporation of community feedback into project design. The critical distinction is between informing communities about a decision already made and involving them in the decision-making process.

Benefit-sharing mechanisms translate project presence into tangible community value. Community benefit agreements, local hiring commitments, revenue-sharing arrangements, community development funds, and infrastructure improvements demonstrate that the project generates value for the host community, not just for distant shareholders. The distribution of benefits and burdens must be perceived as fair—a wind farm that delivers electricity to distant cities while imposing noise and visual impacts on local residents without adequate compensation will struggle to maintain social license regardless of its climate benefits.

Grievance mechanisms provide a channel for concerns before they escalate to opposition. Effective mechanisms are accessible (multiple channels, local language), transparent (tracking and reporting on complaints), responsive (timely investigation and resolution), and independent (perceived as fair rather than company-controlled). The UN Guiding Principles on Business and Human Rights specify criteria for effective grievance mechanisms, and the International Finance Corporation's Performance Standards require them for financed projects.

Council Fire's Approach

Council Fire advises project developers, investors, and governments on earning and maintaining social license through authentic stakeholder engagement, equitable benefit-sharing, and responsive governance. Our expertise in climate resilience and community development enables us to design engagement strategies that connect project objectives with community priorities—particularly in coastal and resource-dependent communities where economic livelihoods, cultural identity, and environmental health are deeply intertwined. We help clients move beyond compliance-driven consultation to partnership-based engagement that builds durable trust.

Frequently Asked Questions

Can a project proceed without social license if it has regulatory approval?

Legally, yes. Practically, proceeding without social license is extremely risky. Community opposition can manifest as protests, legal challenges, permit appeals, political pressure on regulators, media campaigns, investor activism, and—in extreme cases—physical disruption. Each of these increases costs, delays timelines, and creates uncertainty that undermines project economics. Insurance underwriters increasingly assess community acceptance risk when pricing project coverage. Even where projects ultimately proceed over community objections, the operational relationship with the host community remains antagonistic, increasing costs and risks throughout the project lifecycle. The question is not whether a project can proceed without social license, but whether it should—and whether the economics still work when opposition costs are factored in.

How should renewable energy developers approach social license differently than extractive industries?

Renewable energy developers often assume that the climate benefits of their projects automatically confer social license—a dangerous misconception. Local communities experience the visual, noise, land use, and property value impacts of wind and solar projects regardless of their climate benefits. Developers should engage communities before site selection, offer genuine alternatives and design modifications, provide transparent and independently verified impact assessments, and establish meaningful benefit-sharing mechanisms. Community ownership models—where local residents hold equity stakes in the project—have demonstrated the strongest social license outcomes, particularly in Denmark and Germany. The key insight is that social license is about local impacts and local benefits, not global narratives.

How do you rebuild social license after it has been lost?

Rebuilding social license is significantly harder than building it initially and requires genuine accountability, not just improved communications. Start with an honest acknowledgment of what went wrong and who was harmed—without deflection or minimization. Engage an independent third party to assess community concerns and recommend remediation. Implement concrete corrective actions with transparent monitoring. Establish or strengthen grievance mechanisms to prevent recurrence. And critically, demonstrate change through sustained behavior, not one-time gestures. Some companies have successfully rebuilt social license—Newmont Mining's relationship with communities near its Yanacocha mine in Peru improved significantly after the company invested in water quality improvements, community development, and participatory monitoring following years of conflict. But rebuilding takes years of consistent action, and some breaches of trust are irreparable.