Book review of The Social License: How to keep your organization legitimate. By John Morrison

By Roel Nieuwenkamp, Chair of the OECD Working Party on Responsible Business Conduct

‘What is wrong with CSR?’

The title of this chapter in John Morrison’s recent book challenges the concept of Corporate Social Responsibility. The sentence ‘CSR has become a conceptual sideshow and a conceptual ceiling at the same time’ provides important food for thought for CSR practitioners and policy makers. It is time to give more depth to corporate responsibility concepts.

social license

Although Morrison questions how CSR is conceptualized today, this book is a must read for CSR practitioners.  The Social License connects age old philosophical concepts, like the Social Contract, with modern case studies of BP, Newmont, Shell, Dow Chemicals and the Body Shop.

The book elaborates on the concept of ‘social license’, often referenced in the context of extractive industry operations, through explaining what it is and what it isn’t. Morrison defines the social license “as describing the sum of expectations between an organization and relevant social groups (usually represented by other organizations) in relation to a specific activity or set of related activities.’’ Preconditions for the social license to exist are: ‘’All the organizations— both those involved in the activity and those representing the social groups affected— perceive both each other and the activity itself to have sufficient legitimacy to proceed; There is sufficient trust between all the relevant organizations; The organizations representing the affected social groups have consented to the activity in question.”

I found the explanation of the term ‘consent’ particularly useful and well thought-out.  Morrison takes a nuanced view of the issue of consent, taking into account that not all special interest groups or stakeholders are always aligned. Morrison acknowledges the importance of Free Prior and Informed Consent for indigenous people, however he also recognized that consent should not be viewed as an absolute trump card for all communities, as that would privilege ‘’NIMBYism’’ (Not In My BackYard- many people want clean energy, but not many people want a wind turbine farm in their backyard). Additionally, he acknowledges that power imbalances have to be recognized and dealt with in the context of this sensitive issue.

Although the concept of social license originates from the extractive industries, Morrison points out that it is starting to make its way into other sectors. The garment and textiles sector and the ICT sector are examples where the social license of business is currently vulnerable and may become more so in the future.

The author points out that non-judicial grievance mechanisms, such as the OECD National Contact Points (NCPs),[1] can be important in the context of maintaining a social license.  Morrison makes a compelling point that although statements issued by NCP’s are not legally binding, they are linked to a companies’ social license.  For example, NCP Statements could provide information related to social licence criteria such as whether a lack of legitimacy, consent or trust exists in specific operating contexts.

Morrison touches another interesting topic: the passage of soft law into hard law. He gives examples of the California law on transparency in the supply chain on human trafficking and forced labour, as well as mandatory CSR reporting in several jurisdictions, and mandatory regulation on conflict minerals in the US. He makes the link with the importance of transparency in getting and keeping a social license, and what governments are doing and should further do to strengthen this link.

Overall this book provides a useful conceptual and practical contribution to the field of responsible business conduct!

[1] NCPS are established on the basis of the OECD Guidelines for Multinational Enterprises (the Guidelines) to provide good offices for mediation and recommendations regarding disputes under the Guidelines that are not legally binding.

All smartphones should be ‘fairphones’

I finally made up my mind. In the battle of the smartphones, it was hard to make a choice. But now there is the FairPhone

When I acquired my new FairPhone, I joined the ranks of Dutch Minister for Foreign Trade and Development, Lilianne Ploumen and the Head of the United Nations Stabilisation Mission for the Democratic Republic of Congo, Martin Kobler, and instantly became an enthusiastic user.

minerals congo

The Fairphone comes with all the convenience and attraction of a modern day smart phone, user-friendly programming and tools, sleek design and practical features such as replaceable batteries and multiple SIM storage. However in addition to these features the FairPhone has integrated responsible business conduct as a core aspect of its business strategy. Again, proof that products inspired by responsible business conduct and sustainability can be very hip.

Of the 40 minerals generally contained in a smartphone four have become known as particularly risk-prone: tin, tantalum, tungsten and gold. The risk being that using these minerals may contribute to financing  conflict in the Democratic Republic of Congo and its neighboring countries as well as in other high-risk areas.

Conflict-free mineral sourcing has been a topic of growing interest throughout the international community. For the past several years the OECD has been working on this issue. Together with the UN and several African governments the OECD has developed Due Diligence Guidance for Responsible Mineral Sourcing from Conflict-Affected and High-Risk Areas. This government backed multi-stakeholder initiative is now seen as the leading normative framework in the field of conflict minerals. It is endorsed by the UN Security Council and is referenced within national legislation of the  US and several African states. Currently the EU is working on embedding the OECD Guidance in a new legislative proposal for responsible sourcing.

While guidance on responsible sourcing is important and useful it ultimately has no impact unless it is implemented and actually reflected in mineral supply chain management. This is why the concept of FairPhone is so exciting— a high-quality product whose corporate values and sourcing practices reflect the principles of responsible business conduct promoted by the OECD.

For example, the OECD Guidelines for Multinational Enterprises call on enterprises to engage in supply chain due diligence to avoid adverse impacts, in this case financing a conflict in the Democratic Republic of Congo and its neighbouring states. FairPhone applies due diligence throughout its supply chain to understand where its minerals come from and how they are managed.  By working with the Solutions for Hope network and the Conflict Free Tin Initiative FairPhone aims to avoid the use of conflict minerals in the production of their product.

While pulling out of high-risk regions may be the easy way out to achieving conflict-free sourcing, it comes with numerous negative side effects for populations in those regions such as a loss of livelihoods, access to training, infrastructure and other positive impacts that international investment may bring.  This damages development opportunities which in turn can damage peace building prospects.

Therefore sustained engagement using responsible sourcing is encouraged by the OECD Guidelines.  FairPhone has made this engagement the core of their strategy. Rather than avoiding conflict areas, they deliberately source from the Democratic Republic of Congo in order to foster responsible mining practices and to provide opportunities and better the livelihoods for local populations.

The FairPhone is not just an enterprise, it is a social enterprise. The company cites values, rather than profits, as it most important drivers. While the FairPhone currently represents a unique and exclusive business model the approach of prioritizing social value over profit seems to be working.

Similar approaches are being pursued by profit-driven companies as well. For example Intel launched a conflict-free microprocessor earlier this year. The Fairmined and Fairtrade labels for jewellery have likewise promoted socially responsible sourcing as a corporate strategy. These initiatives demonstrate that not only are consumers demanding socially responsible products but that they are even willing to pay a premium for them.

mines congo

However, nuanced approaches to socially driven business are necessary to confront complexities on the ground.  For example, demands for 100% guarantees of ‘’conflict-free’’ status exposes companies to risks and encourages de facto embargos of conflict-prone areas, an approach, as discussed above, that should  be discouraged. Instead companies should focus on process-orientated initiatives such as having strong corporate policies and implementing strong due diligence systems.

I hope that consumers will continue to respond to this type of innovation and that industry will in turn respond to consumer demands of this nature. Such a trend would encourage more sustainable electronics and more ethical mining practices worldwide. My conclusion: all smartphones should be ‘fairphones’!

Prof Dr Roel Nieuwenkamp

Chair OECD Working Party on Responsible Business Conduct

This blog presents the personal opinion of the author.