Estimating the Willingness to Pay for Social Risk Mitigation using the Social Hotspots Database: A National-scale Application in Japan

Purpose: The social life-cycle assessment (S-LCA) provides a framework for evaluating social risks in global supply chains. However, existing risk-based assessments lack an economic valuation of social risks from a stakeholder’s perspective. This study quantifies the willingness to pay (WTP) to mitigate social risks using the social hotspots database (SHDB) and a discrete choice experiment (DCE). The objective is to provide a monetary benchmark for integrating social risk considerations into corporate and policy decision-making. Methods: This study employs a DCE to elicit WTP values for five social-risk categories defined in the SHDB: Decent Work (DW), Human Rights (HR), Health and Safety (HS), Governance (GV), and Community Infrastructure (CM). The survey targets Japanese respondents and collects stated-preference data to estimate the perceived economic value of reducing social risk. The WTP values are derived using mixed logit models, and the annual external cost of social risks is estimated based on these values. Additionally, heterogeneity across demographics (age, gender, income, and education) and occupational groups (employees, business owners, professionals, and non-workers) is analyzed. Results and discussion: The estimated annual external cost of social risks in Japan amounts to 5.2 trillion JPY (52 billion USD), which is equivalent to 1% of Japan’s GDP. Among the five categories, HS is the most highly valued, whereas DW is associated with the lowest WTP despite its significant share of total risk-hours. WTP exhibits heterogeneity; generational differences are observed, with working-age respondents over 40 years prioritizing DW more than younger groups. High-income and highly educated individuals prioritize CM but emphasize GV less, whereas others prioritize the opposite. Compared with employees, non-workers prioritize GV over HS. Business owners prioritize DW and HS, which are related to workplace conditions, while showing less concern for GV and CM, which pertain to workers’ living conditions. Conclusions: This study demonstrates the feasibility of integrating non-market valuation methods into S-LCA, offering a monetary benchmark for social risk mitigation. Future research should conduct cross-national comparative studies to analyze regional variations in social risk perception. Expanding the assessment to a global scale could refine the impact-category compositions, highlighting risks such as child labor and climate-driven social impacts. Comparing SHDB with stakeholder-based frameworks, such as PSILCA, could further enhance the social risk-weighting methodologies in S-LCA.