Licence to operate: understanding the biggest challenge for mining in 2019


A recent survey by EY Mining & Metals found that more than half of global mining companies believe that licence to operate, or acceptance and permission from communities and society, is the biggest risk to their business – jumping seven places up the list from last year. Heidi Vella finds out why this issue is a rising concern and how firms can adapt.

Today, miners are required to juggle many emerging challenges not traditionally associated with metals and mining, such as digitisation, automation and cyber security. Yet, though those are new issues to master, it is not technological disruption that is keeping mining CEOs up at night, but an issue individual companies and the industry as a whole have grappled with for some time: securing the social licence to operate.

Over half of the 250 respondents to Ernst and Young’s (EY’s) annual ‘Top Ten Business Risks’ survey said ‘licence to operate’ was their top concern, skyrocketing the issue to the number one spot, up from seventh place last year.

Why is social acceptance of mining such a growing concern?

According to the survey participants, CEOs and boards recognise the stakeholder landscape is changing and miners need to adapt their current approach, which is not broad enough. Moreover, globalism is advancing nationally, and the necessity of digital transformation highlights the need for a stronger licence to operate.

“Mining companies are now recognising this is a strategic concern,” says Jimena Blanco, head of Latin America research at Verisk Maplecroft, “and an operational one, too; it’s not just about having some corporate social responsibility programmes and investing in the local community: there is a recognition this affects the bottom line.”

The term social licence to operate emerged in the mid-1990s from within the mining industry as a response to social risk. Over the years, the issue has evolved beyond the narrow focus on social and environmental issues to have an increasing emphasis on transparency, shared value and genuine collaboration between governments, local communities and mining companies.