IDEAS home Printed from https://ideas.repec.org/a/eee/jrpoli/v69y2020ics030142072030859x.html
   My bibliography  Save this article

Is social licence a response to government and market failures? Evidence from the literature

Author

Listed:
  • Dumbrell, Nikki P.
  • Adamson, David
  • Wheeler, Sarah Ann

Abstract

The term ‘social licence to operate’, introduced in the 1990s, has increasingly been used to describe the social and environmental standards for firms to meet. Formally, a firm with a social licence is said to enjoy (intangible) ongoing acceptance or approval by communities and other stakeholders that: (1) are affected by the firm and/or their activities; and (2) can influence the profitability of the firm. While the mining industry was the first to identify the need to obtain a social licence to operate, other sectors also recognise its importance. Growth in the frequency and breadth of the terms use has contributed to a substantial body of research. A focus of this research has been the benefits and costs experienced by affected stakeholders as a result of a firm's activities. This suggests that social licence is, partly at least, an economic issue. We conducted a systematic review (with a final database of 651 documents) of the social licence literature to identify what conceptual themes have emerged, and discuss how these conceptual themes relate to fundamentals of welfare economics. By introducing economic perspectives, it was found that social licence concerns stem from government and market failures, namely: (1) negative externalities; (2) undersupply of/threats to public goods; and (3) use of socially valuable assets to generate private profits. We argue that classifying social licence concerns in this way brings clarity to the social licence literature.

Suggested Citation

  • Dumbrell, Nikki P. & Adamson, David & Wheeler, Sarah Ann, 2020. "Is social licence a response to government and market failures? Evidence from the literature," Resources Policy, Elsevier, vol. 69(C).
    • Handle: RePEc:eee:jrpoli:v:69:y:2020:i:c:s030142072030859x
    DOI: 10.1016/j.resourpol.2020.101827
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S030142072030859X
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.resourpol.2020.101827?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Halvor Mehlum & Karl Moene & Ragnar Torvik, 2006. "Institutions and the Resource Curse," Economic Journal, Royal Economic Society, vol. 116(508), pages 1-20, January.
    2. Robin Boadway, 1997. "Public Economics and the Theory of Public Policy," Canadian Journal of Economics, Canadian Economics Association, vol. 30(4), pages 753-772, November.
    3. Kenneth Arrow & Partha Dasgupta & Lawrence Goulder & Gretchen Daily & Paul Ehrlich & Geoffrey Heal & Simon Levin & Karl-Göran Mäler & Stephen Schneider & David Starrett & Brian Walker, 2004. "Are We Consuming Too Much?," Journal of Economic Perspectives, American Economic Association, vol. 18(3), pages 147-172, Summer.
    4. George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
    5. Jean-Jacques Laffont & Jean Tirole, 1991. "The Politics of Government Decision-Making: A Theory of Regulatory Capture," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(4), pages 1089-1127.
    6. Luke, Hanabeth, 2017. "Social resistance to coal seam gas development in the Northern Rivers region of Eastern Australia: Proposing a diamond model of social license to operate," Land Use Policy, Elsevier, vol. 69(C), pages 266-280.
    7. R. H. Coase, 2013. "The Problem of Social Cost," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 837-877.
    8. Pedersen, Rasmus Hundsbæk & Kweka, Opportuna, 2017. "The political economy of petroleum investments and land acquisition standards in Africa: The case of Tanzania," Resources Policy, Elsevier, vol. 52(C), pages 217-225.
    9. Prno, Jason, 2013. "An analysis of factors leading to the establishment of a social licence to operate in the mining industry," Resources Policy, Elsevier, vol. 38(4), pages 577-590.
    10. Arrow, Kenneth & Bolin, Bert & Costanza, Robert & Dasgupta, Partha & Folke, Carl & Holling, C.S. & Jansson, Bengt-Owe & Levin, Simon & Mäler, Karl-Göran & Perrings, Charles & Pimentel, David, 1996. "Economic growth, carrying capacity, and the environment," Environment and Development Economics, Cambridge University Press, vol. 1(1), pages 104-110, February.
    11. Moffat, Kieren & Zhang, Airong, 2014. "The paths to social licence to operate: An integrative model explaining community acceptance of mining," Resources Policy, Elsevier, vol. 39(C), pages 61-70.
    12. Joel Gehman & Dara Y. Thompson & Daniel S. Alessi & Diana M. Allen & Greg G. Goss, 2016. "Comparative Analysis of Hydraulic Fracturing Wastewater Practices in Unconventional Shale Development: Newspaper Coverage of Stakeholder Concerns and Social License to Operate," Sustainability, MDPI, vol. 8(9), pages 1-23, September.
    13. Witold J. Henisz & Sinziana Dorobantu & Lite J. Nartey, 2014. "Spinning gold: The financial returns to stakeholder engagement," Strategic Management Journal, Wiley Blackwell, vol. 35(12), pages 1727-1748, December.
    14. Cragg, Wesley, 2012. "Ethics, Enlightened Self-Interest, and the Corporate Responsibility to Respect Human Rights: A Critical Look at the Justificatory Foundations of the UN Framework," Business Ethics Quarterly, Cambridge University Press, vol. 22(1), pages 9-36, January.
    15. R. M. Solow, 1974. "Intergenerational Equity and Exhaustible Resources," Review of Economic Studies, Oxford University Press, vol. 41(5), pages 29-45.
    16. Marcos-Martinez, Raymundo & Measham, Thomas G. & Fleming-Muñoz, David A., 2019. "Economic impacts of early unconventional gas mining: Lessons from the coal seam gas industry in New South Wales, Australia," Energy Policy, Elsevier, vol. 125(C), pages 338-346.
    17. Joseph Stiglitz, 1974. "Growth with Exhaustible Natural Resources: Efficient and Optimal Growth Paths," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(5), pages 123-137.
    18. Laffont, Jean-Jacques & Tirole, Jean, 1990. "The Politics of Government Decision Making: Regulatory Institutions," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 6(1), pages 1-31, Spring.
    19. David Moher & Alessandro Liberati & Jennifer Tetzlaff & Douglas G Altman & The PRISMA Group, 2009. "Preferred Reporting Items for Systematic Reviews and Meta-Analyses: The PRISMA Statement," PLOS Medicine, Public Library of Science, vol. 6(7), pages 1-6, July.
    20. Jessica Eise & Kenneth Alan Foster (ed.), 2018. "How to Feed the World," Springer Books, Springer, number 978-1-61091-885-5, November.
    21. Stern, David I. & Common, Michael S. & Barbier, Edward B., 1996. "Economic growth and environmental degradation: The environmental Kuznets curve and sustainable development," World Development, Elsevier, vol. 24(7), pages 1151-1160, July.
    22. Cesar Saenz, 2018. "The Context in Mining Projects Influences the Corporate Social Responsibility Strategy to Earn a Social Licence to Operate: A Case Study in Peru," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 25(4), pages 554-564, July.
    23. Costanza, Robert, 1995. "Economic growth, carrying capacity, and the environment," Ecological Economics, Elsevier, vol. 15(2), pages 89-90, November.
    24. Karin Buhmann, 2016. "Public Regulators and CSR: The ‘Social Licence to Operate’ in Recent United Nations Instruments on Business and Human Rights and the Juridification of CSR," Journal of Business Ethics, Springer, vol. 136(4), pages 699-714, July.
    25. Peltzman, Sam, 1976. "Toward a More General Theory of Regulation," Journal of Law and Economics, University of Chicago Press, vol. 19(2), pages 211-240, August.
    26. Owen, John R. & Kemp, Deanna, 2013. "Social licence and mining: A critical perspective," Resources Policy, Elsevier, vol. 38(1), pages 29-35.
    27. van der Horst, Dan, 2007. "NIMBY or not? Exploring the relevance of location and the politics of voiced opinions in renewable energy siting controversies," Energy Policy, Elsevier, vol. 35(5), pages 2705-2714, May.
    28. Lee, Michelle H.W. & Clark, Ashley & Rupp, John & Wietelman, Derek C. & Graham, John D., 2019. "Public opinion toward hydraulic fracturing: The effect of beyond compliance and voluntary third-party certification," Energy Policy, Elsevier, vol. 128(C), pages 306-315.
    29. Cronshaw, Ian & Quentin Grafton, R., 2016. "A tale of two states: Development and regulation of coal bed methane extraction in Queensland and New South Wales, Australia," Resources Policy, Elsevier, vol. 50(C), pages 253-263.
    30. Juan Zhang & Qi Yu & Fashan Zheng & Chao Long & Zuxun Lu & Zhiguang Duan, 2016. "Comparing keywords plus of WOS and author keywords: A case study of patient adherence research," Journal of the Association for Information Science & Technology, Association for Information Science & Technology, vol. 67(4), pages 967-972, April.
    31. Madhu Khanna, 2001. "Non‐Mandatory Approaches to Environmental Protection," Journal of Economic Surveys, Wiley Blackwell, vol. 15(3), pages 291-324, July.
    32. Karakaya, Emrah & Nuur, Cali, 2018. "Social sciences and the mining sector: Some insights into recent research trends," Resources Policy, Elsevier, vol. 58(C), pages 257-267.
    33. Brock Bastian & Airong Zhang & Kieren Moffat, 2015. "The Interaction of Economic Rewards and Moral Convictions in Predicting Attitudes toward Resource Use," PLOS ONE, Public Library of Science, vol. 10(8), pages 1-9, August.
    34. R. Quentin Grafton & John Williams, 2020. "Rent-seeking behaviour and regulatory capture in the Murray-Darling Basin, Australia," International Journal of Water Resources Development, Taylor & Francis Journals, vol. 36(2-3), pages 484-504, March.
    35. Anastassios Gentzoglanis, 2019. "Corporate social responsibility and financial networks as a surrogate for regulation," Journal of Sustainable Finance & Investment, Taylor & Francis Journals, vol. 9(3), pages 214-225, July.
    36. W. Eberhard Falck, 2016. "Social licencing in mining—between ethical dilemmas and economic risk management," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 29(2), pages 97-104, December.
    37. Prno, Jason & Scott Slocombe, D., 2012. "Exploring the origins of ‘social license to operate’ in the mining sector: Perspectives from governance and sustainability theories," Resources Policy, Elsevier, vol. 37(3), pages 346-357.
    38. John Pezzey, 1992. "The Symmetry between Controlling Pollution by Price and Controlling It by Quantity," Canadian Journal of Economics, Canadian Economics Association, vol. 25(4), pages 983-991, November.
    39. Joseph E. Stiglitz, 1991. "The Invisible Hand and Modern Welfare Economics," NBER Working Papers 3641, National Bureau of Economic Research, Inc.
    40. Matebesi, Sethulego & Marais, Lochner, 2018. "Social licensing and mining in South Africa: Reflections from community protests at a mining site," Resources Policy, Elsevier, vol. 59(C), pages 371-378.
    41. Geert Demuijnck & Björn Fasterling, 2016. "The Social License to Operate," Journal of Business Ethics, Springer, vol. 136(4), pages 675-685, July.
    42. Ranacher, L. & Lähtinen, K. & Järvinen, E. & Toppinen, A., 2017. "Perceptions of the general public on forest sector responsibility: A survey related to ecosystem services and forest sector business impacts in four European countries," Forest Policy and Economics, Elsevier, vol. 78(C), pages 180-189.
    43. Richert, Claire & Rogers, Abbie & Burton, Michael, 2015. "Measuring the extent of a Social License to Operate: The influence of marine biodiversity offsets in the oil and gas sector in Western Australia," Resources Policy, Elsevier, vol. 43(C), pages 121-129.
    44. Sachs, Jeffrey D. & Warner, Andrew M., 2001. "The curse of natural resources," European Economic Review, Elsevier, vol. 45(4-6), pages 827-838, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Fernandez, Viviana, 2022. "Innovative intensity in the mining industry: Evidence from patent families," Resources Policy, Elsevier, vol. 78(C).
    2. França Pimenta, Adriano Augusto & Demajorovic, Jacques & Saraiva de Souza, Maria Tereza & de Carvalho Pedro, Samara & Pisano, Viviane, 2021. "Social licence to operate model: Critical factors of social acceptance of mining in the Brazilian Amazon," Resources Policy, Elsevier, vol. 74(C).
    3. Cotterman, Turner & Small, Mitchell J. & Wilson, Stephen & Abdulla, Ahmed & Wong-Parodi, Gabrielle, 2021. "Applying risk tolerance and socio-technical dynamics for more realistic energy transition pathways," Applied Energy, Elsevier, vol. 291(C).
    4. Jun Wen & Lingxiao Li & Xinxin Zhao & Chenyang Jiao & Wenjie Li, 2022. "How Government Size Expansion Can Affect Green Innovation—An Empirical Analysis of Data on Cross-Country Green Patent Filings," IJERPH, MDPI, vol. 19(12), pages 1-22, June.
    5. Fernandez, Viviana, 2021. "Are extractive ventures more socio-environmentally committed?," Resources Policy, Elsevier, vol. 74(C).
    6. Xu, Min & Liu, Yong & Cui, Caiyun & Xia, Bo & Ke, Yongjian & Skitmore, Martin, 2023. "Social acceptance of NIMBY facilities: A comparative study between public acceptance and the social license to operate analytical frameworks," Land Use Policy, Elsevier, vol. 124(C).
    7. Dumbrell, Nikki P. & Wheeler, Sarah Ann & Zuo, Alec & Adamson, David, 2022. "Public willingness to make trade-offs in the development of a hydrogen industry in Australia," Energy Policy, Elsevier, vol. 165(C).
    8. António Mateus & Luís Martins, 2021. "Building a mineral-based value chain in Europe: the balance between social acceptance and secure supply," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 34(2), pages 239-261, July.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yıldız, Taşkın Deniz & Kural, Orhan, 2020. "The effects of the mining operation activities permit process on the mining sector in Turkey," Resources Policy, Elsevier, vol. 69(C).
    2. Santiago, Ana Lúcia & Demajorovic, Jacques & Rossetto, Dennys Eduardo & Luke, Hanabeth, 2021. "Understanding the fundamentals of the Social Licence to Operate: Its evolution, current state of development and future avenues for research," Resources Policy, Elsevier, vol. 70(C).
    3. Xu, Min & Liu, Yong & Cui, Caiyun & Xia, Bo & Ke, Yongjian & Skitmore, Martin, 2023. "Social acceptance of NIMBY facilities: A comparative study between public acceptance and the social license to operate analytical frameworks," Land Use Policy, Elsevier, vol. 124(C).
    4. Demajorovic, Jacques & Lopes, Juliana Campos & Santiago, Ana Lucia Frezzatti, 2019. "The Samarco dam disaster: A grave challenge to social license to operate discourse," Resources Policy, Elsevier, vol. 61(C), pages 273-282.
    5. Costantini, Valeria & Monni, Salvatore, 2008. "Environment, human development and economic growth," Ecological Economics, Elsevier, vol. 64(4), pages 867-880, February.
    6. Mercer-Mapstone, Lucy & Rifkin, Will & Moffat, Kieren & Louis, Winnifred, 2017. "Conceptualising the role of dialogue in social licence to operate," Resources Policy, Elsevier, vol. 54(C), pages 137-146.
    7. Alberto Diantini & Salvatore Eugenio Pappalardo & Tim Edwards Powers & Daniele Codato & Giuseppe Della Fera & Marco Heredia-R & Francesco Facchinelli & Edoardo Crescini & Massimo De Marchi, 2020. "Is this a Real Choice? Critical Exploration of the Social License to Operate in the Oil Extraction Context of the Ecuadorian Amazon," Sustainability, MDPI, vol. 12(20), pages 1-24, October.
    8. Stuart, Alice & Bond, Alan & Franco, Aldina M.A. & Baker, Julia & Gerrard, Chris & Danino, Vittoria & Jones, Kylie, 2023. "Conceptualising social licence to operate," Resources Policy, Elsevier, vol. 85(PA).
    9. Daniel M. Shapiro & Carlos Vecino & Jing Li, 2018. "Exploring China’s state-led FDI model: Evidence from the extractive sectors in Latin America," Asia Pacific Journal of Management, Springer, vol. 35(1), pages 11-37, March.
    10. Tiba, Sofien & Frikha, Mohamed, 2019. "The controversy of the resource curse and the environment in the SDGs background: The African context," Resources Policy, Elsevier, vol. 62(C), pages 437-452.
    11. Anna Katharina Provasnek & Anton Sentic & Erwin Schmid, 2017. "Integrating Eco‐Innovations and Stakeholder Engagement for Sustainable Development and a Social License to Operate," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 24(3), pages 173-185, May.
    12. António Mateus & Luís Martins, 2021. "Building a mineral-based value chain in Europe: the balance between social acceptance and secure supply," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 34(2), pages 239-261, July.
    13. Brueckner, Martin & Eabrasu, Marian, 2018. "Pinning down the social license to operate (SLO): The problem of normative complexity," Resources Policy, Elsevier, vol. 59(C), pages 217-226.
    14. Barbier,Edward B., 2007. "Natural Resources and Economic Development," Cambridge Books, Cambridge University Press, number 9780521706513.
    15. Costanza, Robert & Stern, David & Fisher, Brendan & He, Lining & Ma, Chunbo, 2004. "Influential publications in ecological economics: a citation analysis," Ecological Economics, Elsevier, vol. 50(3-4), pages 261-292, October.
    16. Karakaya, Emrah & Nuur, Cali, 2018. "Social sciences and the mining sector: Some insights into recent research trends," Resources Policy, Elsevier, vol. 58(C), pages 257-267.
    17. Wright, Susan & Bice, Sara, 2017. "Beyond social capital: A strategic action fields approach to social licence to operate," Resources Policy, Elsevier, vol. 52(C), pages 284-295.
    18. Martinet, Vincent & Del Campo, Stellio & Cairns, Robert D., 2022. "Intragenerational inequality aversion and intergenerational equity," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue forthcomi.
    19. Darcy W E Allen, 2020. "When Entrepreneurs Meet:The Collective Governance of New Ideas," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number q0269, January.
    20. Konstantinos Komnitsas, 2020. "Social License to Operate in Mining: Present Views and Future Trends," Resources, MDPI, vol. 9(6), pages 1-15, June.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jrpoli:v:69:y:2020:i:c:s030142072030859x. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/30467 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.