Friday, August 12, 2011

Woodside can not longer afford to consider Social Licenses as flowery rhetoric.

What has happened to Woodside’s Household Survey that was conducted within the Broome & Dampier communities recently? Why have: the findings of the survey not been released, their Social Impact Report put on hold and the consultant’s determined before completion? What has happened to the Browse Social Impact Assessment Community Group and all their concerns raised within this forum?

Woodside and the WA Department of State Development can no longer escape the concept of corporate responsibility nor can they afford to consider Social Licenses as flowery rhetoric.

What do News Corp, BP and the Australian live cattle export industry have in common? Is it something to do with their social licence to operate, or the basic permission that society gives to any corporate organisation to conduct its activities?

A few years ago, you might have dismissed the concept as just a bit of flowery corporate responsibility rhetoric. After all, there isn't a piece of paper titled social licence - and who ever heard of their social licence being revoked?

This position is no longer tenable. News International, BP and the Australian live cattle export industry have all found their social licences seriously under question recently.

A company's social licence to operate is intangible but it is very, very real. And it can be taken away in the blink of an eye. Increasingly, profitable and otherwise successful businesses are having their real-world operations suspended or shut down as a response to moral shortcomings.

What does it look like when a social licence is revoked? Well, as a result of an ethical disaster, News International has just had one of its flagship publications close, almost overnight, has lost the opportunity to purchase another major outlet and may have worse to come.

Or take BP's Deepwater Horizon disaster, following which the US placed a nine-month moratorium on all new deep-water offshore drilling.

The moratorium didn't only affect the culprit, BP. Other companies also lost profits and suffered delays. Some even lost their viability. Texas-based Seahawk Drilling, a $300 million company that had no role in the disaster, filed for bankruptcy in citing the moratorium as the main cause.

Moratoriums are definitely in vogue. Indonesia's got one on new palm oil projects that involve forest clearing. Australia slapped one on live cattle exports to Indonesia following evidence of animal cruelty in abattoirs. New South Wales just put one on licences for coal seam gas projects, because of broad community opposition. Several European countries announced plans to abandon nuclear energy altogether after the Fukushima disaster. The list goes on. There are a few lessons that both the Department of State Development and Woodside and all the under the radar joint venture partners might take warning from these and other recent corporate disasters.

Sufficiently bad stuff-up by anybody anywhere in the supply chain (whether employed by your business or not) can result in businesses being shut down overnight - regardless of whether any laws have been broken. The consequences for breaching your social licence can be far more drastic and immediate than if you breach your planning approval or environmental licence. And forget about defending yourself in the courts; prosecution for breach of a social licence will take place in the media, in the national community, around kitchen tables and there are no appeals.

A sufficiently bad stuff-up by anybody in your entire industry can result in your business being shut down overnight, even if your own operations are squeaky clean (see US oil exploration, or live cattle exports.) This means not only do you have to manage your own company's conduct, you have to do what you can to make sure your competitors are not transgressing the boundaries of social acceptability and responsibilities as well.

In each of these cases, the ethical disaster is in one sense a chaotic event: a minor trigger leading to immense commercial consequences. A man abuses a cow and a whole industry is shut down for months; another taps a phone and a global media empire teeters on the brink.
But in another sense, each case was entirely avoidable had the leaders of the business or industry involved paid close attention to evolving social expectations and concerns.

Nobody at Meat & Livestock Australia really thought the industry could be shut down over the treatment of animals overseas and that the leadership at News International didn't really grapple with the possibility that monstrous behaviour by its journalists could scuttle billion-dollar deals.

Milton Friedman notoriously claimed in 1970 that "the social responsibility of business is to increase its profits". It seems society disagrees. Woodside and the Department of State Development have not, never had and from all accounts never will accept the facts that the Broome and Dampier Peninsular communities will never issue the social Licence to operate. Deal with it and leave town as soon as possible, you are not welcome.


  1. This comment has been removed by a blog administrator.

  2. Woodside Chevron BHP BP and Shell need to take a good look at what a social licence to operate actually means. The Broome community says no and means no.