Blog

Do water authorities need a social licence?

First published by Alluvium at http://www.alluvium.com.au/Blog/October-2014/Do-water-authorities-need-a-social-licence-.aspx

A social licence is a priceless asset. It’s an unwritten contract with society that says (in my opinion) you’ll operate with more than the shareholder's interest - you'll operate also with the community and perhaps even an intergenerational interest at heart.

In May 2014, a large blockade began in the northern rivers of New South Wales to object to the exploration of coal seam gas. After many months the NSW Government referred the approval process that Metgasco had undertaken to ICAC and requested more detail on the community consultation. It was suggested that Metgasco failed to gain a social licence for this work, and had failed to “undertake genuine and effective consultation with the community”. This issue of having a social licence matters simply because it is an unwritten condition to design and construct massive infrastructure projects in line with what the community want. And if you don’t know what people want, you might find out later and it could be costly. 

Let’s now ask - do water authorities need a social licence? Water authorities operate within the laws of the respective jurisdictions, and provide fundamental services to the community in terms of clean drinking water, disposal and treatment of wastewater and support for a range of environmental values. But is that enough? 

The question is relevant for two reasons:

  • We need to be clear on what sort of standards our utilities are currently meeting and therefore, what new entrants to the water market must also met.
  • Water authorities are now being asked to deliver more than pure water services; they are being asked to contribute to liveability. If you operate outside of your legislated operations, you’ll need a social licence.

I can think of the following reasons for water authorities to explicitly gain a social licence:

  • As was pointed out above, it might be a necessary condition to delivering large infrastructure projects – e.g. the North South pipeline ($750 million).
  • As a contributor to liveability in a city, water authorities need to be known as more than just efficient suppliers of goods and services.
  • The rapid adoption of desalination as a water supply source didn’t factor in a mostly negative social response, and as a result the motives of water authorities more recently have been under question.
  • If we expect the likes of Woolworths, Coke, Nestle and Metgasco to gain a social license, why shouldn’t a water authority?
  • In a world of 24 hour media and social media storms, gaining some sort of social licence might be seen as an insurance policy.

And on the flip side, the case for not needing a social licence:

  • It may result in overinvestment – ultimately paid for by consumers.
  • Public utilities should always have a public interest at heart. Therefore they shouldn’t need to go further than they already are.
  • Water authorities might be best served on doing what they do best, and leave the social stuff to politicians and environment groups.

It’s an interesting proposition that the feel good education days, the stalls at shopping centre, the little segments on talk-back radio, and the showerhead give-aways are actually necessary and part of delivering billions of dollars of infrastructure.