Social licence in natural resource dependent industries: Improving understanding and integrating economic perspectives

Abstract

A firm with an (intangible) social licence enjoys ongoing acceptance or approval by stakeholders that: (1) are affected by the firm’s activities; and (2) can influence the firm’s profitability or ability to meet other objectives. However, the social licence concept has a history of practical interpretation and measurement ambiguity. This thesis attempts to bring clarity to the understanding and analysis of the social licence concept and outcomes using economics perspectives. The research crosses various disciplinary boundaries and uses qualitative and quantitative data analysis techniques to address this overarching objective, including a systematic review of the social licence literature, a qualitative comparative analysis of social licence outcomes, and multimethod analyses of case studies. The systematic review details the origins of the social licence concept and its current uses. The review was also used to draw connections between the social licence and welfare economics literature and illustrate that affected stakeholders tend to raise social licence concerns in response to market and government failures, namely: (1) negative externalities; (2) undersupply or threats to public goods; and (3) use of socially valuable assets to generate private profits. Natural resource case studies identified in the systematic review were used in the fuzzy-set qualitative comparative analysis to test for conditions associated with social licence outcomes and firm behaviour change. The results, based on 47 case studies from 25 countries, highlighted that the loss of a social licence was not a sufficient condition for firm behaviour change, and no single condition alone was necessary or sufficient to produce particular social licence outcomes. However, a combination of five conditions was sufficient for a social licence, namely: (1) delivery (or perception) of net economic benefits beyond the firm/project, i.e. to affected stakeholders; (2) adequate stakeholder consultation; (3) minimal media coverage; (4) minimal public protests; and/or (5) absence of well-defined and enforced private property rights. These results highlight that conditions within and beyond a firm’s control influence social licence outcomes. The key outcomes from the systematic review and qualitative comparative analysis were used to guide case study investigations, focussed on the agricultural and energy (future fuels) industries in south-eastern Australia. The case study investigations used data from three surveys (public survey, n=2,032; farmer survey, n=351; and a survey of landholders with a high-pressure natural gas transmission pipeline easement, n=126). Social licence concerns in these industries were shown to be underpinned by market and government failures. Further, econometric methods (e.g. fractional multinomial logit models) were used to identify influences on and heterogeneity in stakeholders’ social licence concerns, and the trade-offs certain stakeholders were willing to make in decisions to grant a social licence in the focus industries. This research presents a novel understanding of social licence, and describes conditions associated with social licence outcomes. It provides a starting point for greater integration of economics perspectives into social licence research and suggests pathways for this. It also reinforces the importance of interdisciplinary research to identify and overcome the challenges that are highlighted by social licence debates in natural resource dependent industries.