How is the term 'social license to operate' defined?

The term 'social license to operate' refers to the acceptance and approval a company seeks from stakeholders, including local communities, governments, and other interested parties. This concept underscores the importance of gaining the trust and backing of these stakeholders, which is critical for the company's long-term sustainability and ability to conduct its operations smoothly.

Unlike a legal permit, which is an official approval granted by government authorities, a social license is more informal and is built on the community's perceptions, attitudes, and beliefs regarding the company's operations. This involves continuous dialogue and engagement with stakeholders to address their concerns and expectations, ultimately forming a social contract that can influence the company's reputation and operational viability.

The other options do not encapsulate the essence of a social license. A legal permit addresses regulatory compliance, while revenue generated by a company and guarantees of profitability relate more to financial performance than to social acceptance. Understanding this concept is crucial for companies, as failure to secure a social license can lead to conflicts, protests, and operational challenges, despite having the necessary legal permits and financial resources.