Abstract
The purpose of this research was to critically analyze the social license to operate (SLO) for an oil company operating in Block 10, an oil concession located in the Ecuadorian Amazon. The specific study area is an important biodiversity hotspot, inhabited by indigenous villages. A mixed-methods approach was used to support a deeper understanding of SLO, grounded in participants’ direct experience. Semi-structured interviews (N = 53) were conducted with village leaders and members, indigenous associations, State institutions, and oil company staff, while household surveys were conducted with village residents (N = 346). The qualitative data informed a modified version of Moffat and Zhang’s SLO model, which was tested through structural equation modelling (SEM) analyses. Compared to the reference model, our findings revealed a more crucial role of procedural fairness in building community trust, as well as acceptance and approval of the company. Procedural fairness was found to be central in mediating the relationship between trust and the effects of essential services provided by the company (medical assistance, education, house availability) and sources of livelihoods (i.e., fishing, hunting, harvesting, cultivating, and waterway quality). The main results suggested that the concept of SLO may not appropriately apply without taking into account a community’s autonomy to decline company operation. To enhance procedural fairness and respect for the right of community self-determination, companies may need to consider the following: Establishing a meaningful and transparent dialogue with the local community; engaging the community in decision-making processes; enhancing fair distribution of project benefits; and properly addressing community concerns, even in the form of protests. The respect of the free prior informed consent procedure is also needed, through the collaboration of both the State and companies. The reduction of community dependence on companies (e.g., through the presence of developmental alternatives to oil extraction) is another important requirement to support an authentic SLO in the study area.
Highlights
The social license to operate (SLO) is usually defined as the level of acceptance an enterprise or a project has from the stakeholders, especially the local communities [1,2,3,4]
Notwithstanding, the mixed methods approach we adopted supported a deeper understanding of the SLO process in the study area by giving voice to the participants and ensuring the results were grounded in their experiences
Procedural fairness was found to have a central role in mediating the effects on trust as determined by company provision of essential services, and the perceived quality of sustenance sources
Summary
The social license to operate (SLO) is usually defined as the level of acceptance an enterprise or a project has from the stakeholders, especially the local communities [1,2,3,4] This implicit contract [3,5,6] reduces the social risk of a company (i.e., potentially costly conflicts with local communities) if its behavior builds trust with the communities: the higher the SLO, the lower the risk [7]. The concept of SLO has attracted much attention, especially for companies whose reputational risk is high [4,8,9,10] This is relevant for extractive industries [1], where negative community effects can result in protest actions [11], damages to the company’s reputation, project delays, and lost profits, reducing the access to future investment opportunities [12]. It has strong links to corporate social responsibility (CSR), which refers to policies and practices (such as programs of social services) adopted by a company as a reflection of its commitment to local communities [15,16]
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