Do short-lived companies need to consider a social license to operate? Learning from an urban renewal project in China

Abstract

Short-lived companies, such as special purpose entities and quick-fail companies, are gradually growing in the field of project development, while whether or not these companies should obtain a social license to operate (SLO) remains to be unclear. This leads to negative social performance, difficulty in operating projects, and failure to achieve sustainability for many short-lived companies. This study conducted an original application of the concept of SLO in an unusual context of short-lived companies conducting public-good projects. A suspended urban renewal project in China was adopted as the study case. Based on qualitative methods, we collected relevant documents and conducted interviews in June and July 2021 with essential informants, including leaders and grassroots staff of the company and the local government, as well as local residents and other stakeholders. By applying a pyramid model including three key concepts of legitimacy, credibility and trust, we analysed how the consideration of SLO can facilitate the company to implement the project successfully. The results showed that a lack of SLO strategies and effective management activities was a major issue. We found that the SLO consideration can generate comprehensive, effective and human-based strategies for the whole implementation period, such as effective community engagement, tangible and intangible benefits distribution, better information provision, fluent communication channels, and monitoring and adaptive management. SLO strategies facilitate the company to not only manage social impacts and reduce business risk, but also fulfil corporate social responsibility and environment, social and governance (ESG) expectations. We argue that although exhibiting different characteristics from long-existing companies, short-lived companies can also benefit from SLO consideration. The social behaviour of the short-lived companies truly influences local residents' trust in the local government. Thus, the local government is suggested to strengthen the regulation and supervision process.