Realizing a development project in Québec and across Canada today entails taking into account the risk of social license, which represents a significant challenge for any project investor or proponent. Managing this risk in the early stages of a new project is now unavoidable.
In Québec and elsewhere in Canada, social license represents a key issue for any project investor or proponent, regardless of the sector of activities. In fact, social license is not limited to the environment, as is often expected, but now transcends all sectors: mining, energy, industry, real estate, banking, transportation, agriculture, etc.
In recent years, we have noticed an increase in the number of projects that are delayed, or even stopped, as a result of the pressures of social license, because it is no longer “acceptable” to impose corporate activities on a community, rather a company must integrate into and be in harmony with the community. Increasingly, people in Québec and Canada demand that projects be implemented in collaboration with the local, regional and indigenous communities as part of a vast consultation and transparent information process.
We have also noticed a genuine preoccupation with “responsible investment,” defined as entailing the integration of environmental, social and governance factors (ESG) in selecting and managing investments.
According to Global Sustainable Investment Review (2018) of Global Sustainable Investment Alliance (GSIA), from 2016 to 2018, the assets managed in Canada based on responsible investment strategies increased by 42%. Responsible investments now represent just over 50% of the assets managed by professionals in Canada, compared to 38% in 2016.
Corporate governance as well as the environmental and social impacts of their activities are now examined by the financial markets. As such, the financial performance of proponents, including obtaining financing for their projects, relies on the implementation of good practices in sustainable development, corporate social responsibility and social license.
That being said, social license is now an indispensable component of any project that is being considered and studied by project investors and proponents.
But what exactly is social license?
Can a business prepare itself to face public opinion? And how can it maximize the chances that the project will be “socially accepted”?
This bulletin presents the scope of the new reality of social license and proposes certain best practices to adopt to minimize the risk that social license represents to any project investor or proponent.
Seeking a Social Consensus
While the concept of a social license is ubiquitous in our society, due to its complexity there still is no consensus as to its definition and the resulting confusion in this regard can cause key players to find it difficult to understand and apply the concept.
Two complementary schools of thought that are widely accepted in our society, however, help us to better understand its meaning and scope.
Some actors, such as the Québec Ministry of Energy and Natural Resources (MERN), consider the concept of social license as “[TRANSLATION] the result of a process by which the actors involved together determine the minimal conditions to be implemented so that a project, program or policy is smoothly integrated, and at a given time, in its natural and human environment.”
For others, social license is directly related to the perception of a risk or threat that a project may present in a given place. They perceive social license primarily as “[TRANSLATION] the prior acceptance of a short- and long-term risk that is part of a project or a situation.”
For example, according to the EY report entitled “Top 10 business risks facing mining and metals in 2019-2020,” social license jumped from the seventh to first position in ranking the ten biggest risks in the mining and metals industry. More than half of the respondents consider it the biggest risk they face.
Social license is therefore both a result (to attain) and a risk (to manage).
One thing that is certain, social license is a vague, complex and fluid concept that emerges from the search for a social consensus, namely, through an agreement that fosters a relative level of adhesion among all stakeholders involved in any way in the project, such as proponents and investors, local government officials, non-profit organizations and citizens (hereinafter the “interested parties”). Social license is not static, nor definitive.
Social license does not involve finding unanimity, this principle was pointed out by the Superior Court of Québec in Ressources Strateco and Arbour, respectively:
“[TRANSLATION] social acceptability corresponds to a threshold, a level which, although it may vary within a spectrum, approaches the notion of consensus without being unanimous.”
“[TRANSLATION] social license does not mean social unanimity. It would be utopic to seek this objective when a project involves varied environmental impacts based on different sectors of the same territory.”
Seeking a social consensus is a collective and dynamic process that must be adapted and adjusted to each project. Among other things, it involves consultation meetings and information sharing and, evidently, requires taking into account the environmental, social and economic impacts of the project.
It seeks to understand the intrinsic realities of the host environment, such as the needs, expectations, priorities, challenges and preoccupations of the different interested parties, and to communicate the components of the project as well as the benefits for the community. Finding a social consensus also involves evaluating and minimizing the impacts and planning to ensure that the project’s economic spin-offs are fairly distributed.
As a result, it fosters the participation and commitment of the interested parties, and maintaining a constructive and continuous dialogue, in order to build a positive perception and public opinion about the project and to justify its legitimacy.
Prior to Launching a Project
The social license process must be started prior to launching a new project and continues throughout the duration of the project (i.e. even after being permitted). Social license does not exist per se, rather it must be built by the different interested parties, who often have divergent visions, values and interests.
Given the importance and complexity of such a process, we recommend that businesses be proactive from the initial planning stages of the project and to exceed basic legislative, regulatory and institutional requirements (e.g. BAPE public hearings) in order to build a genuine relationship of trust with the community.
The Sustainable Development Act, which reflects the principles of the Rio Declaration (signed by Canada in 1992), defines 16 principles that all ministries and public bodies in Québec must take into consideration in their decision-making. One such principle is that “the participation and commitment of citizens and citizens’ groups are needed to define a concerted vision of development and to ensure its environmental, social and economic sustainability.”
It is essential to start the social license process while it is still possible for the proponent to adjust its project (by trying to accommodate the concerns raised by the interested parties) in order to minimize the environmental, social and economic impacts on the host environment. A “good” project must therefore be flexible and include alternatives.
As mentioned in the MERN Green Paper on Social Acceptability, “[TRANSLATION] prior to the authorization process, [social license] requires a preliminary debate about the true issues of a project, the concerns raised by interested parties and citizens, which allows the proponent to improve the project for the purpose of fostering social license in the community.”
Acting before the permitting process is definitely a positive investment for any proponent: this strategy increases the chances of attaining the desired social consensus and minimizing the risks of public opposition and outrage regarding the project.
When the social license process is incomplete or deficient, which is generally due to a lack of information and/or consultation in the early stages of the project, the result may be fatal: the community may not grant social license to the project.
As such, social license relies in large part on the project proponent, and it is ultimately the government’s responsibility to define the conditions for permitting the project in light of the acceptance it will engender in the host environment.