Tag Archives: social license to operate

The social licence and the Bank of England

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Mansion House speech, City of London, 10 June 2015

Inspiring to hear the Governor of the Bank of England, Mark Carney, use the term “social licence” so much in his Mansion House speech in London tonight when making the case for greater accountability. Excellent. Lets hope his audience were listening.  Here are some quotes:

On Markets:

“Markets are not ends in themselves, but powerful means for prosperity and security for all.  As such they need to retain the consent of society – a social licence – to be allowed to operate, innovate and grow.  Repeated episodes of misconduct have called that social licence into question.”

… “Real markets are resilient, fair and effective.  They maintain their social licence.”

On Financial Reform:

“This reform agenda has increased the effectiveness of FICC [fixed income, commodities and currencies] markets and reinforced their social licence.  It is frustrating for us all that such major progress risks being overshadowed by misconduct problems.”

On the Governance of the Bank of England:

“The Bank’s arcane governance blurred the Bank’s accountability and, by extension, weakened the social licence of markets.”

Mark Carney’s full speech can be found here. For more on the social licence.

 

A naïve wish for 2015

 

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Radically transparent supply chains

Once upon a time, in a far away land, the people decided to find out who made all the wonderful things that appeared in the town shop every morning…

As we approach 2015 there is perhaps a small opportunity for some wishful thinking upon a star. The coming year looks like being a tough one. Whilst we might expect good news on US-Iranian relations, tensions between the West and Russia could well deepen and extremists of various kinds are likely to inflict more horrors on the innocent, as recently took place in Pakistan. Europe looks like it will continue its walk towards increasing populism and xenophobia. We can only hope that enough multilateralism will prevail for forthcoming agreements on Climate Change and the Sustainable Development Goals. But what on business and human rights?

We all wish there will not be another incident of the scale of the Rana Plaza factory collapse in Bangladesh (which killed over 1,100 in April 2013) or the Turkish mine disaster (which killed over 300 in May 2014). Globalisation has lifted millions, if not billions, out of abject poverty over the past thirty years but it has also widened national inequalities and increased the power of non-state actors such as business. We can and should work for stronger laws, stronger enforcement and greater accountability but will it be enough? The social contract that binds our societies is shifting and national governments are struggling to keep up with the demands of communities and the wider population.

There perhaps has not been a time in history when democracy has been so widespread but also so undervalued. There are also signs that some governments want businesses to play an increasing role in the social contract itself, be it in terms of internet governance, on the one hand, or public-private partnerships to realise the Sustainable Development Goals, on the other. Given it will take years, if not decades, to respond adequately to these changing power dynamics, what are the essential steps we take in the meantime?

Greater transparency is clearly an essential step and this will not be news to any reader. Over the past ten years, there have been a range of important initiatives between governments, business and civil society on issues such as extractive sector revenue and tax, conflict minerals, timber or even the social audits of ICT, apparel or food companies. But we have a problem. These important initiatives, or laws that mandate transparency, operate outside of wider public awareness or scrutiny. And this lack of public interest limits the political prioritisation given to human rights by governments, the responsiveness of business and the resources available to NGOs.

Fundamentally, there is a lack of sufficient incentives within most value chains for lasting systemic change. For example, this week’s BBC Panorama undertook another documentary on a leading brand, this time Apple, and allegations of the abuse of migrant temporary workers in the supply chain including excessive overtime. In previous years it has been other brands with allegations of  child labour and so on. The issues raised are very serious but they are often, but not always,  systemic in nature. If you might think that such media attention would lead to changes in consumer behavior, well think again. The BBC journalist fronting the documentary on Apple admitted at the start of the piece how much he loved the product, as do I, and many people I know. Just looking at the number of iPhones and Macbooks evident at the recent United Nations Annual Forum on Business and Human Rights – that says it all – we all love to buy quality brands if we can afford to, perhaps feeling that even experts do not have the knowledge they need to make consumer choices either way.  Let me be clear – we don’t yet have the objective benchmarks to make such a decision about any ICT company and this is part of the problem and well as the frustration every time such a documentary is made.

If companies do change, and some are making big efforts, it is not driven by consumer behaviour or investors at the moment. Just think how much more we could achieve if we brought consumers and investors with us!

There are clearly not enough incentives and disincentives in the system for fundamental change. Law should provide more of these – particularly laws that capture the “submerged” actors who are not brought into the debate by public or political commentary. Conflict mineral legislation is one example of this and we can hope in 2015 to see more binding law relating to modern day slavery and the incorporation of the 2014 ILO Forced Labour Protocol into national legal regimes. And, yes, there might well be a case for a binding international treaty on business and human rights (more on this in 2015). But it would indeed be naïve to think that law alone will really drive the behavioural change we need amongst consumers and investors.

Also needed are market-based drivers. That is why many of us think that the public ranking of companies performance against human rights benchmarks is critical and we have recently launched a broad-based initiative to achieve this over the years ahead. Investors have a critical role to play: few companies will want to be bottom of their sector’s league table in terms of their human rights impacts. But consumers are also a critical factor that can no longer be over-looked.

So here are two radical fairytale endings.

The first possible ending: imagine that we in our fairytale town and when we go to the large furniture store (well known for its wonderful flat-packs) and you have the chance of interacting with a human being at the other end of the value chain. Through the magic of information technology and an image projected onto a screen, you would be able to pose questions to a worker representative at that week’s featured supplier on the other side of the planet and ask whatever question you liked (through an interpreter) about working conditions, the worker’s concerns and aspirations. Within the next ten years, one of the major retail brands will do this and, by doing so, begin to change the whole dynamics of corporate responsibility. It is nonsensical that consumers currently carry no responsibility for their own purchasing behaviour, this can and will change if consumers are given an opportunity to engage in the “kingdom of the supply chain” as Auret Van Heerden once called it.

A second possible ending: imagine a chain of fairytale theme parks in major cities such as Los Angeles, Orlando, Paris, Tokyo and so on and who currently spend many millions of dollars on supply chain auditing for the soft toys and other items sold therein. Imagine that they decided that supply chain auditing alone was never going to end the eternal risk of being caught out should some wicked goblin decide to scrutinise the supply chain with the hope of finding something, anything, that might embarrass the magic kingdom. Given that the theme parks touch hundreds of millions of people at some point of their lives, then they have an unrivalled opportunity to bring visitors into some state of awareness about supply chain conditions. Imagine that in every theme park there is a “supply chain interactive museum”, full of wondrous information about the real world.

Over time, consumer awareness of the complexities of supply chain management would increase and they would begin to ask the right questions of their own buying behaviour, and begin to reward those brands trying to do the right thing. This would save millions if not billions of dollars currently spent on auditing across industries, and instead some of this money into consumer awareness. Auditing would still have an important role to play – but disclosure and reporting would be more meaningful and be much more accessible to the most important stakeholder for any retailer – the consumer (or as we used to call them, the customer).

Sorry for the wishful thinking, but it is that time of year. I hope we will all live happily ever after, or at least until 1 January.

The start: Why The Social License?

I wanted to write a book about the current state of affairs at the business-society interface and wanted a fresh approach – not one following the tramlines of existing ‘corporate social responsibility’  (CSR) thinking or another book on business and human rights, there have been several excellent books already written on the latter (not least by my colleagues at the Institute for Human Rights and Business). I wanted to come to the issues afresh and from first principles as much as possible. I am therefore wholly to blame for the arguments set out in the book and this blog.

The enduring vision I have of why I work in this area is that of the evolution of the marketplace – a point Anita Roddick was lucid on. Several hundred years ago, and still in physical markets in many parts of the world, buyers and sellers operate in close proximity – they know each other, where each other lives and are likely to meet on a weekly or daily basis. There has been and still is, in such market places, a greater sense of interpersonal accountability. This is not to say that there were not long complex supply chains in past ages (obsidian, for example, was traded over thousands of kilometres over thousands of years) and also there were clearly abusive practices such as slave labour, but customers were much more actively involved in making judgements about the quality and reliability of not just the product but also the behaviour of the seller. Contrast this with the world of the past 20 years, where global value chains are hugely complex and where the humans involved (be they workers, investors, customers or consumers)  are very much disempowered in their ability to  influence the way the business of business is conducted.  We need new tools, awareness and laws to bridge this gap which has externalised the true social and environmental cost of production. At a instinctive level, the book is a reaction to the dehumanising effect of much of what we now call the global marketplace.

I was also interested that the term ‘social license to operate’ was emerging in many different places around the world and for different reasons. True, it remains a term still associated mainly with the extractive industries, but it I hear it elsewhere – within constitutional think tanks in Kenya, for example, or US-based beverage  companies. It is an attractive term because it is suggestive of a rationale about why any non-state actor should engage in social issues, particularly why an organisation whose primary stated purpose is not social (i.e. a business) should do so.  Unlike CSR or even human rights, it is an outcome and not just an objective. That said the term ‘social license’ was not clearly defined and was at risk quickly moving into the category of ‘self-declaratory CSR’ – as John Ruggie would call it.

So the book tries to pin down the ‘social licence’ concept and in a way relevant not just to business, but all other types of organisation. The pinning required something of a conceptual framework, more perhaps than a non-academic book should attempt (particularly when written by someone who is very much not an academic).  I had the work of all my colleagues in the business and human rights field as ballast – which reminds us that a human-centric approach must be about impact and impact in human rights terms. And that accountability is about redress and remedy, but it is also about prevention as well as transparency. This I had ‘in my back pocket’ so to speak and those of you that read the book will see it becomes an important feature of the later chapters. But I needed to get there – and particularly for the more skeptical reader who might think that ‘social licence’ sounds nice but is just a fashionable buzz word, and that human rights and business have little to do with each other.  Therefore I evoked the thinking of some of the greatest in making some superficial but important links back to social contract thinking of 200-300 years ago. It is not so easy to dismiss social contract theory as fluff given the influence it had on shaping democracies and ideas of civil society in many parts of the world.

It seems I am one of the first in the world to define social license in social contract terms, and you can judge to what extent I pull this off. The social contract experts who have seen my book have been polite and kind, but I knowingly dip my toe into what are very deep waters. However, there is much of what I seen in the writing of those such as Locke, Hobbes and Rousseau which does resonate with questions about the role of business (and other organisations) in contemporary society. At a minimum, I hope to provoke a reaction from which we all might learn something. And, as my patience with the ‘CSR industry’ is wearing thin, I give us all a good collective kick to do better and too ask the tougher questions about the activities of all of our organisations.

I will not just be blogging to promote this my first book. Rather I wish to develop my own voice and thinking on a range of issues, perhaps resulting in future books perhaps to be written by others. I hope some of you will share this journey through your own comments and writings. The role and legitimacy of non-state organisations in today’s world (be they businesses, NGOs, communities, religious organisations, regional authorities and so on) is one of the most fundamental of our life time and so tough questions need to be asked.