Achieving a social licence to operate can help companies in the extractive industry become more effective, says Jem Thomas and Marissa Moran from Albany Associates

"Local communities need to be engaged genuinely and meaningfully"

The extractive industries have been digging for treasure throughout Africa and the Middle East for decades; pacifying the occasional labour and environmental disputes with traditional corporate social responsibility (CSR) programmes, and at times, hard security: more armed security guards, more razor wire.

However, since the Arab Spring and the instability that has accompanied it, corporations are thinking twice before breaking into emerging markets, despite the significant opportunities for both investors and local populations. Investments can quickly turn sour if the political and security environment changes, and CSR is no longer enough. In 2013 alone, there have been 18 incidents in the Niger Delta, ranging from vessel hijacking and attacks to kidnapping and deliberate pipeline destruction, costing the oil industry there some $1 billion per month.

Currently in Libya, the national oil output has suffered dramatically due to a toxic mix of tribal feuds, disgruntled employees and rent- seeking militias. In all cases, the strategic and financial consequences are huge.

The answer for companies facing these kinds of challenges lies in a strong and responsive ‘social licence to operate.’ SLO reaches beyond the government-granted licence to operate and prioritises engagement with local, but powerful actors who have previously been ignored or only superficially approached. The presence of a foreign company must be legitimate in the eyes of those who stand to lose from their natural resources being extracted.

Albany Associates, a comprehensive communications firm working in challenging environments, is researching the major communication and engagement issues facing corporations working in these fragile contexts. The findings, based on interviews with communications directors and community liaison officers from leading extractive companies, reveal challenges beyond the expected language and cultural disparities.

Initiatives such as grassroots engagement with local leaders, or culturally sensitive public information campaigns have the potential to significantly mitigate the risks to organisations operating in challenging environments.

Respondents highlight the issue of managing local expectations, many of whom perceive a new venture as their instant ticket to wealth. “We identify the difference the mine can make in the lives of people, but we can’t change everything,” says Andrew Hocking, group manager of community relations at MMG Ltd, about exploration in the Democratic Republic of Congo. Others stress the significance of a social licence across west and sub-Saharan Africa because, as one senior oil and gas consultant puts it, “There’s so much material poverty that social wealth takes on vastly greater importance than it would in any other context.” As a result, he continues, relationships depend on multinationals giving due credit to national and local actors instead of boasting about their own achievements.

Instead, genuine dialogue and forums should be created in which the concerns of local communities can be voiced, who can then perceive that foreign companies are truly listening. For host governments likewise, such forums can be advantageous in helping to distribute the fair returns generated by a nation’s oil or mineral wealth and can counterbalance delegitimizing political disputes which threaten stability.

Albany’s research makes one thing clear: local communities need to be engaged. This is the most effective way to determine the win- win situation for community, company and host government. To make this happen, the companies themselves must take the initiative.