The Social Licence as a Form of Regulation for Small and Medium Enterprises
| Author | David Williamson,Gary Lynch‐Wood |
| DOI | http://doi.org/10.1111/j.1467-6478.2007.00395.x |
| Date | 01 September 2007 |
| Published date | 01 September 2007 |
JOURNAL OF LAW AND SOCIETY
VOLUME 34, NUMBER 3, SEPTEMBER 2007
ISSN: 0263-323X, pp. 321±41
The Social Licence as a Form of Regulation for Small and
Medium Enterprises
Gary Lynch-Wood* and David Williamson*
Traditional forms of regulation have been criticized for not adequately
protecting the environment. Indeed, there is evidence and growing
support for the view that societal pressure can act as a social licence
which induces `beyond compliance' behaviour. In exploring this view,
the paper (a) outlines the characteristics of the social licence; (b)
assesses how these characteristics can influence the environmental
behaviour of small and medium enterprises; (c) presents a model which
shows that social licence pressures depend on the interplay of a range
of factors; and (d) applies the model to explain why societal pressures
rarely induce beyond compliance environmental behaviour among
small and medium enterprises.
INTRODUCTION
Controlling the environmental impact of firms is vital if we are to achieve a
sustainable level of development. This has traditionally involved the use of
direct regulation in the form of licences and sanctions for pollution
offences.
1
More recently, policy-makers have dev eloped a range of
economic instruments including environmental taxes, subsidies, and tradable
permits.
2
A less well-known form of control is the social licence, which is
defined as the `demands on and expectations for a business enterprise that
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ß2007 The Author. Journal Compilation ß2007 Cardiff University Law School. Published by Blackwell Publishing Ltd,
9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA
* Sustainability, Policy and Regulation Research Centre (SPaRRC), School
of Law, University of Manchester, Williamson Building, Oxford Road,
Manchester M13 9PL, England
gary.lynch-wood@manchester.ac.uk dave.williamson@manchester.ac.uk
We would like to thank Anthony Ogus, David Vogel, Wyn Jenkins, and our anonymous
reviewers for their very helpful comments.
1C.Hilson, Regulating Pollution: A UK and EC Perspective (2000).
2R.Revesz, P. Sands, and R. Stewart, Environmental Law, the Economy, and
Sustainable Development (2000).
emerge from neighborhoods, environmental groups, community members,
and other elements of the surrounding civil society'.
3
The social licence is
considered important because it is a form of control which requires firms to
meet society's environmental expectations, and thereby avoid activities that
societal groups find offensive, regardless of whether these expectations are
enshrined in law.
4
This is attractive for policy-makers who are under pressure to reduce the
overall regulatory burden,
5
since it implies that firms can be more
responsive to self-regulation. Notwithstanding its attractiveness, the actual
application of the social licence as a policy instrument is hampered by a
lack of understanding of how its constituent elements determine its power
and influence in a full range of contexts. We try to bridge this gap by
outlining the key features of the social licence and the conditions for their
operation. Having done this, we focus our analysis on how the social licence
influences the environmental behaviour of small and medium enterprises
(SMEs), which are firms that have fewer than 250 employees (and a
turnover of less than 50 million euros or a balance sheet total of less than 43
million euros
6
). From this analysis we develop a model which identifies the
factors that determine, and the relative strength of these factors in
determining, the influence of the social licence. The model is then used
to explain why social licence pressures are unlikely to bring about beyond
compliance behaviour in SMEs.
THE ECONOMIC AND ENVIRONMENTAL IMPORTANCE OF SMEs
It is widely acknowledged that SMEs have considerable economic and
environmental impacts. In the European Union, for example, there are 23
million SMEs. They account for 99 per cent of all firms, the employment of
75 million people,
7
67 per cent of the non-financial business workforce, and
57 per cent of business value added.
8
The term SME incorporates three
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3N.Gunningham, R. Kagan, and D. Thornton, `Social License and Environmental
Protection: Why Businesses Go Beyond Compliance' (2004) 29 Law and Social
Inquiry 307, at 308.
4id. See, also, S. Joyce and I. Thompson, `Earning a Social License to Operate:
Social Acceptability and Resource Development in Latin America' Mining J.,11
June 1999.
5 Better Regulation Task Force, Regulation ± Less is More: Reducing Burdens,
Improving Outcomes (2005); P. Hampton, Reducing Administrative Burdens:
Effective Inspection and Enforcement (2005).
6 These criteria are used by the European Commission (Recommendation 2003/361).
Other jurisdictions use different criteria (
7 .
8 Eurostat, European Business: Facts and Figures (2006). The data are for 25
member states. Value added is the income generated by firms out of which is paid
wages and salaries, the cost of capital investment, and financial charges, before
ß2007 The Author. Journal Compilation ß2007 Cardiff University Law School
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