Importance Of Social Cost Benefit Analysis To Business

7 April, 2017

A Social cost benefit analysis, also known as economic analysis, is a decision-making strategy which helps in assessing the impact of investment business projects on the society as a complete. It is an organized and cohesive mechanism to contemplate the impact of development projects on society. The objective of analyzing the social cost benefit is to weight the heterogeneous impact of your development project on societal elements such as pollution, real estate, legal prospects, health, environment etc. As a result of the analysis, the project decision maker can precisely elucidate the social welfare impact of the project.

The impact of social cost-benefit analysis can be positive or negative. The positive impact is called as a social benefit and the negative impact is termed as a social cost. SCBA is different from CBA in the sense that it has an extensive view because it tries to study the social values of the entire society rather than taking into account the profitability of individuals who are a section of the society.


SCBA: social cost benefit analysis

CBA: cost benefit analysis


The objective of SCBA is to resolute monetary benefits of any project in view of shadow prices, how projects influence savings and investment of people in the society, the influence of the project on the money distribution in the society. It is also essential to review how certain parameters such as employment, self-sufficiency would be fulfilled if the project is executed.


Applications Of SCBA:


SCBA can be applied in both public and private investments.


Public investment: social cost analysis of your development projects is important majorly for developing countries. When the government of a country plays an integral part in structuring the economy of a country analyzing the social impact of the project is essential.


Private investment: For private development projects analyzing the social impact is important because these projects are approved based on government and quasi-government agencies.






Benefits of Social Cost-Benefit Analysis:


SCBA helps in identify mechanisms that can maximize the benefit of the development project for the social welfare

It entitles the investors to cohesively differentiate various project alternatives

The SCB analysis enables prioritization of your business resources so that maximum profit can be achieved

Prior analysis helps in establishing decision-making strategy for different projects and also providing chance to apprehend social criticism

SCBA assess the purpose of the development project in view to the community needs


Drawbacks Of Social Cost-Benefit Analysis:


It is often challenging for business managers to  establish a balance between financial gain and social welfare

Overstatement of the significance of social benefits

Conversion of social benefits into monetary units is also a problem area in SCBA




Outcomes Of Social Cost-Benefit Analysis:


The result of making social cost-benefit analysis is that it helps the business managers to take policy decisions on the basis of the calculated risks involved if the project is executed. The scrutiny gives a lucid picture between cost and benefit distribution letting the managers take an informed decision.  At the end of the SCB analysis, we can conclude how the project will impact the employment opportunities and standard of living of the society.


Externalities(harmful or beneficial impact of the project) related to the project can be assessed after the social impact of the project has been analyzed. The outcome of this analysis metric helps the government to take up projects which benefit the entire society and not just a few individuals which further improves the economy of the country.

WP Facebook Auto Publish Powered By :