Social Licence and Trust in Corporate Australia

Project Duration: June 2019 – May 2020

What Australian company directors think of SLO and related concepts of trust

The Challenge

Increasing attention on corporate regulation is being directed towards the concept of ‘social licence to operate’ (SLO) and its potential impact on businesses and how they navigate changing societal expectations. While SLO issues have been investigated for many years in the context of the mining and resources industries, their application in diverse corporate activities more broadly is not yet well understood.

In 2018, proposed reforms that sought to incorporate SLO as a formal concept within the Australian Securities Exchange’s Corporate Governance Principles were highly controversial and sparked robust debate.

Growth in corporate attention to SLO reflects a wider questioning of the purpose of corporations and the evolution of the stakeholder/shareholder debate. This is taking place as the narrow emphasis on shareholder returns shifts towards an expectation that corporate actions will take into account impacts on a wider range of societal interests and stakeholders. But what makes an organisation responsible and responsive to this range of concerns?

Our Response

CSIRO’s Responsible Innovation Future Science Platform partnered with Flinders University to undertake research that explores how changing societal expectations are not only understood but also influencing corporate priorities and decision-making.

To do this, researchers conducted a qualitative interview-based investigation of the perspectives of 24 highly experienced Australian (predominantly non-executive) company directors to explore these issues. Respondents represented the boards of more than 80 companies ranging in size from smaller proprietary companies to large publicly listed organisations with market capitalisations in excess of AU$50 billion. The industries from which directors were drawn included manufacturing, consultancy, resources, food and beverages, technology, banking and financial services, and energy.

Project Impact

The research explored the nature of responsibility associated with corporate decision-making from luxury goods through to essential services. While the focus of this research was largely on the responsibilities of publicly listed corporations, it was universally observed that social performance pressures are high and decisions about ‘doing the right thing’ are complex and ongoing.

While respondents identified the importance of social licence to social and reputational capital, they emphasised the importance of boards having access to the ‘right information’. This information needed to be about stakeholder networks and the quality of those interactions to equip them for increasingly challenging and time-sensitive decision-making contexts. In addition, reputational capital was acknowledged as having an increasing influence on the ability of corporations to attract and retain talent. And finally, while there was a recognised focus on the creation of long-term responsible investment portfolios, changes in societal investment patterns were also observed to be influencing investment and governance in complex ways.

Team

CSIRO: Justine Lacey; Flinders University: Vivienne Brand and Jordan Tutton.

Additional information on public perceptions and responsible innovation is available:

Summary of initial results published by the Australian Institute of Company Directors (July 2020): https://aicd.companydirectors.com.au/membership/membership-update/director-perceptions-of-social-licence-to-operate-in-corporate-australia