Social license - a game of snakes and ladders

The full text of my opinion piece first published in the Australian Financial Review on 22 September 2022.

Maintaining a law firm’s social license to operate is like playing an expensive game of snakes and ladders.

Climbing a ladder, such as being a carbon negative firm, might keep a firm a step ahead of competitors for a short while. But landing on a snake, like a public claim of bullying and harassment, can take a firm from the top of the board to near the bottom in a heartbeat.

Porous boundaries are making the game more complex. A disgruntled staff member will now more likely voice their complaint on Instagram rather than talk with HR.

There are also growing expectations on firms not just to be in social license ‘maintenance’ mode but be proactive advocates for social change. The current campaign towards the Indigenous Voice is a clear case in point.

Tickets to the game are also becoming more expensive.?For example, government clients are insisting firms comply with a range of social procurement conditions in order to do business with them.?Certification under the Information Security Registered Assessors Program, for example, is costing some law firms over $100,000 per annum in policy generation, compliance and audit fees.

Rather than dealing with each social license question or issue in isolation, it is useful to have an overall framework or game plan. This can help identify and pre-empt the questions that may arise. It can also help the firm’s leadership to clarify core motivations, for example, are we driven more by the fear of exposure or the moral imperative to do the right thing?

The Archie Carroll pyramid of corporate social responsibility provides a useful framework in exploring this social license construct and how it might apply to law firms.?Developed in 1991, it has become an easy reference point because of its structure.??

The pyramid has four levels.

Economic responsibilities

Society expects businesses to create value and to use scarce resources cost-effectively. Profits are necessary to incentivise owners and to fund innovation.

Legal responsibilities

Society has not only sanctioned businesses as economic entities, but it has also established the minimal ground rules or laws under which firms are expected to operate and function. Solicitors also need to meet the standards established by relevant professional regulatory bodies.

Ethical responsibilities

Taking on ethical responsibilities implies that firms are expected to do what’s just and fair and to avoid harm. Law firm support for same sex same-sex legislative change in 2017 is good example.

Philanthropic responsibilities

The general public expects businesses to be good corporate citizens and to ‘give back’ in some form to the communities that they operate in. Pro bono legal work is a case in point.

Economic responsibilities are at the bottom of the pyramid because they are a foundational requirement in business. Sustained profitability must be strong to support society’s other expectations of enterprises. As one moves up the pyramid, the responsibilities become more discretionary and move from being required to being desired.

Carroll states that while ethical responsibility is presented as a separate category, it “should also be seen as a factor which cuts through and saturates all elements of CSR”.

Business ethics will form a much larger element in business decision making in the years ahead. Law firms will need to extend their current commercial and legal conflict processes to include broader social license and ethical considerations.

The pyramid also highlights the tensions and trade-offs that arise in addressing all four areas of responsibility. For example, a firm’s expenditures on legal, ethical and philanthropic obligations come at a short-term cost to shareholders. However, this needs to be weighed against the long-term benefits of building brand equity, risk reduction and employee engagement.

The social license snakes and ladders game has no finishing line. Expectations keep shifting and growing. Having a clear framework to consider your choices will be better than just rolling a dice and hoping for the best.