A Social Licence for Businesses — A Band Aid That Won’t Stick
The language of social licence is becoming more widely applied in business, especially in the public company arena, and is seen by some as the answer to regulator and community concerns over company conduct. It is, however not universally accepted in Boardrooms and fails to address the underlying causes of ‘poor business conduct and performance’.
Active Knowledge Question:
Do you believe your business requires a social licence to operate?
The language and concept of social licence are not new and traditionally have been present in projects where that project would significantly impact a local community — think mining in remote areas and the communities living in those areas.
Within Australia, recent Royal Commissions — government-sponsored independent enquires — have highlighted the failings of large corporations in acting legally and ethically. Moreover, globally, many companies are facing challenges to their business models — think Facebook and Google. There is intense light being shined on the conduct of businesses around the world.
In response and in addressing these concerns, what is now being called for is a much broader and universal application of the concept of social licence — companies actively seeking and maintaining a permission to operate.
A social licence is seen as a stepping stone to rebuilding the trust that communities have lost in businesses and their leaders.
Where social licence fails is that it does not address the profit-bias that exists almost universally in businesses, and the bigger they become, it seems the stronger and deeper this bias grows.
A social licence will never succeed where a profit-bias exists. It is literally the band aid that will not stick. The starting point is to shine the light on the fallacy of the profit-bias. Weaken and remove the profit-bias and a social licence will not be necessary, and trust in business leaders will be a natural outcome.
The greatest fallacy of our time is that businesses exist to profit — to profiteer.
Many would argue that the responsibility of boards and management is to maximise the profit of a business for shareholders. But a profit-first motive seeds selfishness, self-interest, politics and short-termism. Making profit a motive for being in business literally saps the competitive strength from it. And herein lies the fallacy, profit as a motive will deliver less profit for a business than otherwise could be achieved.
Make profit your motive for being in business, and you will spend every day solving problems, fighting fires and listening to everyone else’s complaints. But understand how to make your business competitively fit, and profit will be a natural outcome, and all the problems that a ‘profit-first’ motive creates will disappear.
Businesses are made to compete.
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All the best in the success of your business,
Richard Shrapnel
