Organizational Governance Organizational Governance

How Community Connections Can Drive the Long-Term Sustainability of Your Business

Giving back to the communities that supply your business with labor and raw materials isn’t just a matter of ethics or public relations; it’s also a wise business practice to adopt for its own sake. Taking care of the people who live and work in your company’s shadow ensures the long-term sustainability of your supply chain and improves the quality of the talent pool that may someday produce your best and brightest employees.

By Mark Lefko | Published 7 years ago | About a 4 minute read

Your company bears some degree of ethical responsibility for the wellbeing and sustenance of communities that become economically dependent on you — something we can call a social license or social license to operate. This term generally refers to a community’s acceptance or approval of a project or a company’s ongoing presence. Unlike regulatory license (which depends on government), social license is informal, being based on the feelings of a community. This informality can make it difficult to determine whether social license has been granted, and a company that is not monitoring its relationship with the local community may be caught unawares if its social license to operate has been revoked.

There are varying degrees to which social license may be granted, and it can be further cemented when a company operates with greater concern for the in which communities it operates. This also serves as a safeguard to a company’s reputation if something goes wrong (e.g. environmental disasters, unexpected necessary layoffs, etc).

But a social license can also be diminished or even lost due to unforeseen events or a company’s actions. This makes it conditional, a trait it shares to some degree with regulatory license (which a government can and will revoke in response to violations of laws or regulations).

A great example of a company that understands the power of augmenting its social license in the communities it operates in is Carnival Australia, which operates cruise ships in remote areas of the Pacific Ocean. Many of these destinations are small countries with underdeveloped economies — indeed, some of these societies do not have any cash economy at all.

But Ann Sherry, who has been CEO of Carnival Australia since 2007, says that it’s critically important for her company to concern itself with the wellbeing of the people who inhabit these places.

“To really be sustainable in a business like ours you need partnerships with the places you go because you need them to want you to come,” Sherry told me. “If they don’t want us to come, they can lock us out in a nanosecond. And so that’s led us to rethink the way we engage with the communities we go to in the Pacific.”

In other words, the islanders must benefit economically from Carnival’s presence, or the business is endangered. To build those kind of mutually beneficial, long-term relationships in the community, Sherry says that companies need to engage in conversations with community members to understand what they need out of the relationship.

In Carnival Australia’s case, that means creating committees to offer input and ideas on how the company can contribute directly to the local economy. In one case, a community suggested that passengers might like the option to go fishing with the local islanders when their ship was in port. While that sounded like a great idea, the islanders fished out of dugout canoes.

“We looked at these and thought maybe we don’t want people floating around the Pacific in a dugout canoe,” Sherry said. “So we bought some more stable kayaks the islanders could use to run short tours, take people out fishing, and give them an experience. And that gives them real cash. Now they’ve started to do more work in their community that once they couldn’t afford — such as putting solar panels on, and things like that.”

By working in this way with the people whose homes serve as the backdrop for Carnival’s customers’ vacations, Sherry builds an economic relationship between them and her company. And, of course, this cooperation serves Carnival’s interests by providing its customers with an authentic local experience. When you combine these two elements, we find a great example of how a company can do well by doing good. If you give back to the communities where you do business, they’ll give back to you in the long run.