Has the mining industry lost its Social Licence to Operate – or is it just being reviewed?
The phrase Social Licence to Operate is one of those that many people use, yet doesn’t have a universal and concrete definition. But the lack of clarity about exactly what it is hasn’t stopped it popping up in media commentary.
Just last weekend, while I was busily writing this post in fact, renowned Australian demographer Bernard Salt commented on the tenuous nature of the ‘social licence’ held by several of our largest institutions. I have been writing and speaking about SLO, in the context of the relationship between big corporations and small business, for quite a few years now. Maybe the horror stories emanating from the Banking Royal Commission have kindled increased interest in the topic. Whatever the cause, the discussion is very welcome.
What is a Social Licence to Operate?
A Social Licence to Operate isn’t like a Driving Licence, or even a Mining Licence. You can’t buy one over the counter.
I found this definition that I think sums it up.
The social licence to operate (SLO) refers to the level of acceptance or approval by local communities and stakeholders of mining companies and their operations.
So, the question I have posed in the title of this article is “Has the mining industry lost its acceptance and approval by local communities and stakeholders”?
Why ask this question now?
I think this is an important question to ask at this time because the mining industry that collapsed and (almost) died in 2012-2013 appears to now be off life-support, and preparing to leave the hospital.
Things in the mining industry are bubbling again, and have been for quite a few months now. Here’s some indicators that are obvious to everyone:
- The number of Fly-In Fly-Out (FIFO) workers on the planes in and out of the Bowen Basin.
- The amount of traffic in the mining towns of Queensland.
- A noticeable increase in the number of trucks transporting big yellow machines to the mining areas.
- Upwards pressure on wages.
- Local businesses finding it hard to find skilled (or any) staff.
- Housing vacancy rates have reduced significantly.
- Property values and rents are showing signs of increasing.
So far though, very little of this is hitting the news or being noticed outside the immediate impact zone of the resources production areas. There is the occasional article in the business press, but as one business person remarked to me, “ … there’s a lot of activity, but not much noise”.
So what does that have to do with a Social Licence to Operate?
The connection between this increased activity and the industry’s Social Licence to Operate is implicit in the dot points above. The mining industry has a gigantic economic footprint in the areas where it operates.
In business circles it used to be said that if the US economy sneezed, Australia got the flu. That applies a thousand times over to the mining industry and its host communities. If the mining industry gets a sniffle, regional economies are admitted to the intensive care ward.
Universally, those host communities are happy that we are crawling out of the black hole of the resources bust. Shop owners, restaurateurs, service business owners and local authorities alike report that they are getting busier. And they do so with a smile on their face.
However, the very next thing that everyone says is, “Just so long as we don’t go back to the madness” – or some variant of that phrase.
“We just don’t want to go back to the madness of the resources boom”
What was the “madness”?
The madness that these people are referring to was exemplified by:
- Sky-high wages that other industries simply could not compete with as resources companies scrambled to attract workers.
- Other industries being drained of employees as these people migrated to the resources companies.
- Decline in regional services as population increases put pressure on providers and it became virtually impossible to recruit staff.
- Sky-high real estate values.
- Astronomical rents.
- Shortage of housing availability forcing people to leave the area.
- Social disruption as the demographic profile of regions changed.
I could continue adding to that list, but you get the idea.
To be clear, I am not arguing for the shut-down of the resources industry. Mining has been a part of the Australian economy for a very long time, and I am not addressing the coal/anti-coal debate in this article. That’s not the topic here. My own company has supplied environmental services to the mining industry for many years, helping managers to meet their environmental obligations (and beyond).
What I am arguing against is the mad, headlong rush to get all the coal (and iron ore) out of the ground at once – and before the other companies. They all rushed to one side of the boat together and Government joined the rush, chasing a royalties bonanza.
And then the boat tipped over.
When the inevitable roll-over happened, the host local communities became the collateral damage.
- Real estate values and rents plummeted.
- Resource postcodes were blacklisted by lenders.
- Contracts were summarily cancelled.
- Businesses collapsed.
- Mental health became an even more important issue.
- An entire cohort of young workers had to readjust their expectations, having been lulled into believing that an unskilled worker really was worth $120,000 per year.
There is an argument that Australia, overall, is better off as a result of the resources boom.
Australia’s Productivity Commission in its December 2017 Report concluded that:
While the mining boom has caused transitional pressures, it has also made Australians substantially better off in the short term and over the long term.
But if the industry’s Social Licence to Operate is issued, at least partly, at the local community level, those “transitional pressures” (see the dot points above) are what host communities will be judging, not the benefits or otherwise to the national economy.
So, has the mining industry lost its Social Licence to Operate?
My perception, from my interactions with community members is that the answer is no, but with a distinct caveat that sounds like this:
We’re OK with you being here, but don’t muck it up like you did last time.
It’s wonderful to see life and activity returning to regional economies. I can’t tell you how uplifting it is to see smiling faces in shops and small businesses again.
But those same people still have very raw wounds from the madness days. In time, there will be another boom and bust, and everyone – mining companies and Government included – will make exactly the same mistakes again.
But just at the moment, the industry is on a good behaviour bond, with its Social Licence held as security.
Social licence protects reputation and creates opportunity. Learn how to earn yours in Small Business, Big Impact.