When ‘Loss of Social Licence’ becomes a real thing

Recent floods on the east coast of the North Island, the last one during cyclone Gabrielle, have resulted in a big problem for the country’s forestry industry, both materially, and for its reputation. Leaving aside the material aspects – damage to homes and infrastructure from harvest residue (slash) and entire trees being carried away by the floods, damage to forestry operations, etc. – the impact on the industry’s reputation has been severe. “It is disheartening to witness the erosion of our social license, which is now at its lowest point in recent memory. While we acknowledge there are areas where we can improve, I believe forestry and forests offer more benefits than drawbacks. However, we struggle to effectively communicate and convey these benefits to the public.” – said the industry association’s president, James Treadwell, in a note to members recently.

In manufacturing, we often talk about a loss of our social licence to operate as if it were a theoretical risk only. And indeed, while individual companies occasionally suffer reputational damage as a consequence of product failures, poor manage-ment of harmful emissions, etc., it is hard to envisage a scenario where a sub-sector like machinery and equipment manufacturers, for example, or the industry as a whole, would lose their (social) licence to operate on a scale comparable to the current threats to forestry.

This is a classic example of ‘known unknowns’ for some, and unknown unknows for others. Two aspects need to be considered here. First, sometimes serious ‘offences’ by some can create reputational problems for an entire sector. Second, the actual loss of a licence to operate is rarely that – a complete loss – rather than an erosion of trust that leads to pressure from the outside and a reduced ability to operate profitably. Be that because of difficulties to attract the workforce ideally required, consumer (customer) product boycotts, or increasing government regulation, with the latter often being the most tangibly serious one. In our forestry example, one of the recommendations made as part of Ministerial Inquiry into the matter reads: “Introduce legislation that provides tailor-made legal frameworks for the restoration and maintenance of the environmental health of the Waiapu and Waipaoa Rivers, including conferring legal personality on the rivers, in conjunction with the establishment of a governance entity empowered and resourced to act and speak on their behalf.” That may sound innocuous in a first-pass read, but is likely to cause a lot of future headaches for forestry in the region.

The question that remains for our sector is – if a serious challenge to our reputation were to happen, how (well) are we prepared to respond in terms of structures and processes? Who would manage the response on behalf of manufacturers, and how?