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Report n°2: An integrated approach to economic and social contestability in business

Social contestation of a recycling operator on environmental or safety grounds

The second type of contestation considered relates to social protest on environmental or safety grounds. It characterises the extent of a firm's exposure to a credible threat to its social licence to operate for reasons of public interest, particularly environmental or public health risks attributed to the firm's products or processes(7). The nature of the frames of reference in this type of protest explains the adjective "social" used to describe this type of contestation. The firm's sensitivity to this kind of threat depends on its particular economic characteristics, its economic contestability and the range of options available to neutralise or confine the potential protest: a firm's exposure to a threat to its social license to operate is all the greater when its field of activity or strategic choices have caused it to invest massively in specific, non-transferable assets. The latter soak up costs that are impossible to recover over the short term and are likely to turn into heavy losses if the firm has to quickly disengage itself from a sector or branch of activity.

In the arguments that follow, the threat to a firm's social license to operate can be triggered by an operator working in the same branch, by potential competitors or by stakeholders not engaged in the activities of the branch. The first two threats are referred to as internal social contestation (by operators within the branch, or potential entrants) whereas the third is referred to as external social contestation (by players outside of the process). Here, the adjective "external" designates the absence of economic relations between the protestor and the target.

Internal social contestation that is based on denouncing environmental risks to the community may be triggered by players whose particular characteristics - their status, for instance - and their own anticipation of a threat to their own legitimacy raised by a protest on environmental and safety issues push them to criticise or re-qualify(8) a commercial relationship (the supply of goods or the procurement of services) in which they are a partner, and act as a spokesman for the common good; then they refer not only to the economic aspect(9) of the transaction but to other legitimate definitions of the collective well-being.

In the same way as for economic contestation, it is useful to distinguish two possible forms of external social contestation.

Local challenging vigilance and NIMBY protests
The first form of contestation manifests itself in latent or active opposition to an existing activity aroused by nuisances or negative externalities generated on a local basis(10). We identify this kind of protest as a local challenging vigilance and Nimby protests. It occurs when incidents take place or nuisances are continually or periodically produced that affect the neighbourhood. When targeted at a potential new entrant, it is referred to in the literature by the acronym "Nimby" or "Not In My Back Yard".

Generalizing social contestation
This second form of protest is broader-based in terms of the frame of references and opponents involved. It is based not on nuisances in the immediate vicinity but on risks to the community (or "collective risks") affecting a much larger set of players, as was the case in France with the movements opposing nuclear power plants and GMOs (Hommel, 2001; Hommel and Godard, 2001). This kind of protest is typically fomented by players who neither belong to the branch nor live in the vicinity of the facilities concerned. These players form a coalition in order to coordinate their efforts and focus the undivided attention of the public authority and have it involved in their battle. Protests start with preliminary work to identify and build knowledge on the alleged risks, then go on to broadly denounce the targeted potential health hazards or environmental risks to the public.

(7) We do not attempt here to analyse the different stages in the process of social contestation or the strategic games that those involved in a process of public expertise may have to play. On this topic, see Adant and Hommel (2004).

(8) See Boltanski and Thévenot (1991) and Godard (1990) on the processes of criticising and re-qualifying a situation in relation to a concept of a common good different from the concept of mutually advantageous profit from trade.

(9) For instance, consider a local public authority committed to a contract for delegated management: it is a party in an exchange related to a service. It has one fundamental property - its status - that allows it to stand away from its position of an economic agent, and criticise that relationship because it poses environmental or health risks to the community. We are including this idea in the theory of contestability, even though it is not immediately relevant to our case study of ferrous-metal recycling.

(10)Typically, neighbourhood conflicts.