Companies must plan for the business challenges presented by heightened government scrutiny in the form of oversight, regulations, and legislation, all shaped by the views of the consuming public and the pressure that they place on their elected representatives. The more disruptive the business model or product offering, the earlier and more intense the scrutiny to be expected – and the more important the need to anticipate and proactively react to it. As a result, companies must understand:

1. The impact of business, especially technology-based, models on local and national communities and economies.

2. How that has influenced both regulatory and societal licenses to operate in any given market. 

Barron’s Dictionary defines “license to operate” as a, “grant of permission to undertake a trade or carry out a business activity….(by) agencies, and also by private concerns.” As businesses enter into increasingly disruptive market models, their long-term viability depends upon not only regulatory but also social licenses to operate.

Regulatory Licenses to Operate are generally explicit in nature, granted by municipal / station / national / regional governments upon the demonstration of compliance with established laws and / or regulations. In new and emerging business models, these regulatory obligations may be more amorphous and evolutionary as the business and its impacts on the locality become evident.

Social Licenses to Operate are implicit and more complex in nature. They are effectively a referendum on the business and its market model not only by the governing body but by the general public. Such licenses take into consideration both the beneficial and detrimental impact of the business and market model.

As regulations, public controversies, and the economic environment become increasingly intertwined, companies have to address not only their black letter legal / regulatory obligations but also adapt to consumer expectations. Failure to take early and / or proactive steps to do so and protect a social license to operate puts the regulatory license to operate is at risk, either with explicit denial by the relevant government and / or amended laws and regulations to effectively block market entry.

Governments can no longer be seen as an obstacle to growth. Rather, they must be approached as a partner. The corresponding dialogue should not be confrontational but conversant. Potential concerns and problems with business models and product offerings are best identified early in the process and presented for consideration and education. New forms and forums of dialogue created early with local and national governments accelerate understanding of the potential impact on associated international discussions.