Integrating Social Impact Evaluation with Cost Benefit Analysis

This video investigates the relationship between Social Impact Evaluation (SIE) and Cost Benefit Analysis (CBA). How can Social Impact Evaluation be used to enhance the quality of a Cost Benefit Analysis? How can Social Impact Evaluation and Cost Benefit Analysis be used together to present a more complete picture to decision makers? These questions and more are addressed in this overview of the relationship between Social Impact Evaluation and Cost Benefit Analysis?

Social Impact Evaluation has been designed to capture, assess and present the social impacts of options and/or projects to enhance the quality of project evaluation included in business cases of project initiatives.

I developed Social Impact Evaluation (SIE) when I worked at Building Queensland between February 2016 and March 2017. Social Impact Evaluation draws on concepts from Social Impact Assessment (SIA), Social Returns on Investment (SROI), and Cost Benefit Analysis (CBA). Social Impact Evaluation is not intended as a standalone evaluation of a project’s social impacts but instead integrates existing evaluation techniques such as Cost Benefit Analysis, financial analysis, benefits management, and sustainability assessment.

Social Impact Evaluation is most valuable at the early stages of project development such as during the problem identification phase. A key concept in Social Impact Evaluation is the Social Impact Baseline (SIB). The Social Impact Baseline is the world in the absence of a proposed project option. Identified problems and the extent of identified problems should be outlined, defined and ideally measured as part of the Social Impact Baseline. The Social Impact Baseline should be forward looking and be used to understand the future state of the world as well as future problems. Another critical role of the Social Impact Baseline is to be used a yardstick to be compared against project options. For example, a new treatment for a disease cures 90% of the infected. This information on its own means very little if we do not know what percentage of infected people are cured with the existing treatment. If the existing treatment only cures 10%, the benefit of the new treatment is far greater than if the existing treatment cures 85%.

Social Impact Evaluation is used to identify impacts (positive and negative) and determines if these impacts can be monetised for inclusion in a Cost Benefit Analysis or quantified using other non-monetary metrics. Social Impact Evaluation advocates the use of stakeholder engagement as a primary input into determining impacts as well as the perceived extent of these impacts. Impact Risk Assessment is advocated to determine the materiality of identified impacts. Impact Risk Assessments are typically conducted using stakeholder input and as workshops to capture as many perspectives as possible. The result of the Impact Risk Assessment influences the development of options as well as the mitigation strategies required to handle negative impacts and the enhancement strategies required to maximise positive impacts. The results of the Impact Risk Assessment feeds into the financial analysis and risk register.

The results of the Social Impact Evaluation and Cost Benefit Analysis can be summarised in an Appraisal Summary Table (AST). The Appraisal Summary Table captures the results from the Impact Risk Assessment, Cost Benefit Analysis, as well as summarises any relevant qualitative discussion around the project options’ impacts.

The video can be watched at the link below:

For a more complete picture of Social Impact Evaluation watch the following video introducing the Social Impact Evaluation and the key concepts behind it at the following link: