The document discusses how oil companies in Nigeria can obtain a social license to operate from local communities. It explains that social license is a community's perception of a company's acceptability based on trust in areas like community health, economic growth, and environmental protection. The document outlines three ways for companies to earn social license: 1) engaging communities to understand their needs, 2) conducting impact assessments with transparency, and 3) creating shared value through community development and jobs. It also describes measuring social license across four levels from no license to full trust. The document argues that oil companies in Nigeria need innovative problem solving and dialogue, not force, to operate peacefully with host communities.

1. Social Licence to Operate: A solution for
community crises with oil companies
March 02, 2018

2. INTRODUCTION
Globally, resistance from local communities threatens the growth of
extractive and energy sectors such as oil and gas and mining. For instance,
over the past decade, Nigeria has witnessed drastic reduction in crude oil
outputs, not mainly because of oil price volatility in the international
market, but due to resistance from host communities in the Niger Delta.
Such resistance has led to several deaths, economic losses, prohibition of
projects, and has continued to threaten the activities of oil and gas
companies not for the lack of a legal license to operate, but for the lack of
a Social Licence to Operate (SLO).
2 | Social Licence to Operate: Solution for community crises with oil companies

3. Social Licence to Operate and the Niger Delta Crises
3 | Social Licence to Operate: Solution for community crises with oil companies
Social Licence to Operate is described as a community’s
perception of the acceptability of a company and its
local operations. The licence in this case is a
psychological agreement and broadly depends on the
ability of host communities to trust companies on
several areas such as: community health and safety;
economic growth of the community; environment
conservation; and negative footprints in the
community. Collectively, this trust is what makes
companies good neighbours and acceptable in their
communities, as well to earn customers loyalty,
workforce retention, and attract equity investors. This
concept indicates that companies cannot succeed
without a proper plan for peaceful cohabitation and
engagement with their host communities.

4. How Oil Companies Can Obtain Social Licence to Operate
Social licence to operate is usually obtained on a project or community
specific basis, as each situation and community is different. Hence, it is
vital that every company should investigate and understand the social
issues and needs of the individuals, groups, and organisations that form a
specific community under consideration. The following are factors that can
help organisations to earn the trust of their host communities:
4 | Social Licence to Operate: Solution for community crises with oil companies

5. 1) Community Engagement
Community engagement should be geared to
build trust, enlist new resources and allies, create
better communication, and improve overall health
(project) outcomes. Companies and their
contractors or third party representatives should
start to communicate openly and honestly with
the community, using representatives that
community members may know and trust.
As Social licence can never be self-awarded,
business cannot determine the level of socio-
environmental risk intervention needed to meet
community expectations. The reality is that
corporate social responsibility or investment
projects that are carried out with community
engagement to determine what their needs are,
not one that is too much of a side-show or green
washing, will help the company to obtain social
licence to operate.
5 | Social Licence to Operate: Solution for community crises with oil companies

6. 2) Conduct Impact Assessment and Disclosure
Companies can also obtain SLO from the
communities by conducting sustainability impact
assessment that reveals their negative socio-
environmental footprints, and providing solution
to address them. Maintaining transparency
through appropriate reporting and disclosure of
their impacts to the concerned stakeholders and
monitoring it at the board level, accords a
company the opportunity to earn the trust of
their host communities and other concerned
stakeholders.
6 | Social Licence to Operate: Solution for community crises with oil companies

7. 3) Create Shared Value
One of the interesting business transformation in
recent times is the shift from profit greed to shared
value. With the new shift, firms are now building
long-term profitability and existence that is hinged
on cohesion with communities and other key
stakeholders. This requires that company’s activities
should add positive value to the local economy,
enhance the capacity of people, support community
development, and enhance income generating
activities such as contracts, jobs and other payouts.
7 | Social Licence to Operate: Solution for community crises with oil companies

8. How to Measure Social Licence to Operate
According to the Thomson and Boutilier framework, SLO exists in a four-level hierarchy. To
advance in the hierarchy, the project must meet criteria of legitimacy, credibility, and trust.
But at the lowest level, SLO does not exist, and projects cannot proceed; the community
perceives them as illegitimate.
8 | Social Licence to Operate: Solution for community crises with oil companies

9. 9 | Social Licence to Operate: Solution for community crises with oil companies
Social Legitimacy
Social legitimacy is based on the norms of the community, that may be legal, social and cultural
and both formal and informal in nature. Companies should understand and respect these
norms, as failure to do so risks rejection. In practice, the initial basis for social legitimacy comes
from engagement with all members of the community and providing information on the project,
the company and what may happen in the future and then answering any and all questions.
Credibility
The capacity to be credible is largely created by consistently providing true and clear information
and by complying with any and all commitments made to the community. Credibility is often
best established and maintained through the application of formal agreements where the rules,
roles and responsibilities of the company and the community are negotiated, defined and
consolidated. Such a framework helps to manage expectations and reduces the risk of losing
credibility.
Trust
Trust comes from shared experiences and requires that companies should create opportunities
to collaborate and generate shared experiences with host community. It is dynamic and non-
permanent because beliefs, opinions and perceptions about different projects and companies
are subject to change. Hence trust has to be earned and then maintained. If lost, trust can also
be regained as in the case of Safaricom:

10. 10 | Social Licence to Operate: Solution for community crises with oil companies
Kenyan mobile phone operator, Safaricom, whose network – along with others – was
inadvertently used to spread hate speech by including bulk text messages after the 2007
elections violence which led to over 1,000 deaths mainly in the Rift Valley. Safaricom worked
hard in the period before the next election in 2012 to share the precautions it was taking to
limit hate speech whilst protecting freedom of expression – including the involvement of third
party observers. Safaricom built up strong social licence at a time of national transition and
very significant social challenges.
The best way oil and gas companies can
live in peace and earn the trust of their
host communities in the Niger Delta is not
by deploying security agents to force their
operations, but by setting a stage for
innovative problem solving and initiating
dialogue that enhances mutual learning
with communities.

11. Retrospect
1. Should Religious Organisations Manage Their Sustainability Impacts?
2. Why Agriculture is a Major Environmental Polluter
3. Why Extractive-Based Nations Fail: Between Resource and Knowledge-Based
Economies
4. Towards The Bleak Future of Crude Oil: What Nigeria Should Do Now
5. Mainstreaming Street Hawking in a Formal Economy: An Inclusive Approach to
Development
6. The Reality of Nigeria’s Recession Exit: Between GDP Growth and Sustainable
Development
7. Home Grown Manufacturers that Have Rocked Our World – Part II.
8. Nigeria’s 7 Strategic Minerals: Our Alternative to Clean Energy?
9. Sand Dredging in Nigeria’s Waterways: Between the Economic Boom and
Environmental Doom
10. Is TSA Panacea to Nigeria’s Fiscal Policy Woes?
11. Non-Governmental Organizations Regulatory (NGO) Bill: A Threat to Civil Liberty?
12. Sustainable Investment: Is Nigeria Getting It Right with AMCON?
13. Visionary Home-Grown Manufacturers That Have Rocked Our World – Part I
14. How Business Can Drive Human Solutions
15. Power: Nigeria’s Most Immediate and Pressing Challenge?
16. Fears of Genetically Modified Foods in Nigeria: What Experts Say
17. A Health, Safety and Environment (HSE) Observation on Nigeria’s Electricity Industry
11 | Social Licence to Operate: Solution for community crises with oil companies

12. Reference
1. Business and Society: Defining the ‘Social License’. Guardian, John Morrison
2. Industry’s Social License to Operate. Adjacent Oil & Gas, Nathan Meehan,
2016 President
3. Obtaining A Social License To Operate – A Challenge For The Industry. BP
Global Speaker: Dev Sanyal, 22 November 2012, London
4. Securing A Social License To Operate Is More Important Than Ever. Mary
Hogan, Hart Energy Friday, February 6, 2015
5. What Is the Social License? Ian Thomson and Robert Boutilier
6. Center for Clinical Bioethics. Community engagement image. Retrieved
from https://clinicalbioethics.georgetown.edu/communityengagement
7. Social innovation generation. Shared value image. Retrieved from
http://www.sigeneration.ca/creating-shared-value-mean-nonprofit-sector/
8. DPO center. Impact assessment image. Retrieved from
https://www.dpocentre.com/services/impact-assessments/
12 | Social Licence to Operate: Solution for community crises with oil companies

13. About
CSR-in-Action is a conglomerate of 3 sustainability driven
businesses; Consulting, Training and Advocacy. Our mission is to
redefine the sustainability terrain in Africa, through collaborative
strategies with key stakeholders aimed at attaining higher levels of
corporate governance, workplace and sustainable philanthropy.
We have a clear vision to propel collective transformative action in
Africa by promoting responsibility amongst all entities in their day-
to-day individual or business activities.
Contact:
54, Udeco Medical Road,
Chevron Drive, Lekki Phase1,
Lagos State.
234-807-688-4871
info@csr-in-action.org
www.csr-in-action.org