What does a social licence to operate mean in mining?

The state regulates mining operations in many ways, and a variety of different permits are required for mining. In connection with mines, reference is often made to a “social licence to operate”, which aims at preventing conflicts between the mine and local people.

What exactly does the social licence to operate mean and what does it refer to? The National Audit Office of Finland has examined the question in its recently published report Perspectives on sustainable mining in Finland. (An English translation of the publication will be published soon.)

Obtaining a social licence to operate requires interaction with the local community

People are worried about the impacts and risks of mining activities all over the world. The mere possibility of future mining may raise considerable opposition among local residents. The environmental risks of mining and the negative impacts of mining on other business activities are often highlighted in the debate.

In order for companies to be able to carry out ore exploration and mining activities, they must obtain the approval of the local community. This is often referred to as the social licence to operate (SLO).

A social licence to operate is not an administrative permit granted by the authorities but an interactive process for creating and maintaining approval and trust. The licence is based on the concept of socially sustainable development and corporate social responsibility. The question is to whom and in what matters companies are accountable. If a mining project lacks a social licence to operate or if a mining company loses it, a conflict may easily arise between the company and the local community.

The local community’s approval is important during the entire mining project

There are many different dimensions to earning a social licence. Good relations with local residents and other users of the area are important both in the exploration phase and during mining operations.

The process of establishing a mine – from mineral exploration to starting business – usually takes long. Therefore, the local community has to live in uncertainty for a long time.

The media have recently reported of a case where a foreign company withdrew its reservation for ore exploration in the Lake Päijänne region, particularly because it met with resistance from summer residents. A reservation refers in this case to a notification giving priority to apply for an ore exploration permit later on.

In practice, a reservation for ore exploration seldom leads to the establishment of a mine. In the Lake Päijänne case, the company did not even start ore exploration as a result of the opposition expressed by the local residents.

Obtaining a social licence to operate depends on the special characteristics of a mining project

Each mining project is different. The potential adverse effects or risks arising from them may be very different. Mines can be located in sensitive natural habitats, close to inhabited areas and communities, or in sparsely populated areas. As a result of this, the preconditions and means of earning a social licence to operate may differ considerably between mining projects.

In Finland, it has proved difficult to obtain local approval in the Lake Saimaa region, where the preservation of natural values plays an important role. In the above-mentioned Lake Päijänne case, the debate also highlighted the risk of contamination of drinking water in the capital, as the Greater Helsinki Area receives its domestic water from Lake Päijänne.

Reconciliation between mining and other business activities in the area often plays a key role in the achievement of local approval. In Finland, tourism and reindeer husbandry have been considered to be industries that are not necessarily easy to reconcile with mining operations. On the other hand, in the municipality of Kittilä, tourism (above all the tourism centre Levin Matkailukeskus) and the gold mine in the area benefit from each other. The mine is a significant employer. This increases the demand for services, and thus they can also be offered more extensively to tourists all year round. At the same time, tourism in Levi and companies in the area are important for the mine. Tourism makes the Kittilä mine more attractive as a workplace.

Earning a social licence to operate gives a competitive edge to a mining company

Local approval is part of companies’ self-regulation. The Sustainable Mining Network was established in Finland in 2014, following the accident in the Talvivaara mine, to serve as a forum for discussion and cooperation between the mining industry and its stakeholders. The network has developed a mining responsibility system consisting of eight assessment tools. One of these tools is interaction with stakeholders. The social licence to operate is thus an integral part of the Finnish mining responsibility system.

Although mines pose environmental risks, mining also offers opportunities. For example, Finland’s soil contains many key minerals needed for the production of green technology, such as cobalt, nickel, lithium and graphite.

The EU has started to believe more strongly that is has to become increasingly self-sufficient in terms of critical minerals. Another issue that has become increasingly highlighted in recent years is the ability to produce minerals under sustainable production conditions. A social licence to operate is required to achieve both of these targets. To the mining industry in Finland, obtaining local approval may therefore mean a competitive edge. It makes it possible to ensure the continuity of its business and also to prove that its operations are socially sustainable.