Today, companies in resource-intensive foundational industries are seeking to boost sustainability and profitability at the same time – an approach known at AMCS as Performance Sustainability. Performance Sustainability enables companies to achieve growth, while prioritizing social responsibility, safeguarding the environment, and reducing operational risks – including risks to the health and safety of their workforce.
There are two reasons managing directors usually focus on health and safety : liability and responsibility. Associated costs are on the other side of the coin. That’s why, in many companies, it’s common for occupational safety specialists to showcase the economic viability of occupational safety and health. To what extent do planned or implemented measures contribute to the overall success of the company? Compliance with laws, unnecessary costs due to accidents or illness, a shortage in staff, property damage or production downtime, are strong support for the argument for robust occupational safety and health measures and resources. But other smaller things can also help you convince internal stakeholders, such as motivation, employee satisfaction, and the company's reputation.
Of course, ethical arguments also matter. Ultimately, every employee should return to their family and friends safe and sound at the end of a workday. Management is usually interested in: how can we use sound facts and data back up the positive relationship between occupational safety and health and the company's success?
collecting arguments
Here you’ll find a range of arguments that prove the economic value of health and safety:
- The return of investment from one euro
- The cost of accidents at work
- A safety management system (SMS) pays off
- Why reputation is at stake
- Employee recruitment and corporate branding
1. the return of investment from one euro
Numerous national and international studies on the so-called return on prevention provide answers to the question of the economic efficiency of occupational safety and health. The study of the German Social Accident Insurance (DGUV) "Calculation of the international 'return on prevention' for companies" can be used as an example.
What is the Return on Prevention (RoP):
The RoP determines the extent to which investments in occupational health and safety are economically worthwhile. Based on the return on investment (RoI), this key figure is intended to prove that a low number of accidents at work increases a company’s productivity.
The international study of the DGUV comes to the conclusion that the RoP factor is 2.2. This means that every euro invested in prevention brings a return of 2.20 euros from a business point of view. The key figure was calculated based on numerous interviews and expert surveys. The details of the exact procedure can be found at the DGUV website.
The outcome certainly depends on the size and industry of a company and therefore cannot always be transferred one-to-one. You should acknowledge this in your argument. Is the presentation of the economic benefits of occupational health and safety still too abstract? In this case, you can draw on specific facts from your company – such as the number of accidents at work.
2. the cost of accidents at work
Modern controlling works with key performance indicators (KPIs) - such as the Lost Time Injury Frequency Rate (LTIFR), the Severity Rate, or the Lost Workday Rate that help visualize the status quo of occupational health and safety in a company. But how do KPIs ultimately support your argument?
- They are used as a comparison with other companies.
- They illustrate the development/stagnation of the success of your measures in occupational safety and health.
- They help to illustrate the costs of accidents at work. This point in particular, is important in your argument. An investment in improved occupational safety and health will also depend on whether the expenses are profitable and the accident costs (such as continued payment of wages, compensation, damage to property, repair costs, production losses, administrative costs, etc.) are considerably reduced.
Calculation Example: LTIFR
A construction company has 200 employees who work 328,000 hours. In 2020, 26 personal injuries occurred that resulted in a loss of working hours. The employees were absent for 325 days (a total of 2,525 hours) due to an accident.
LTIFR = personal injury with loss of working time / working hours x 200,000 = 26/328,000*200,000=15.8
In the calculation example, each work accident with downtime leads to an average of 12.5 days of absence, and a total of 325 days of absence annually. Converted, that's almost two full-time positions. If one assumes that an accident hour costs 50 euros, accidents with loss of working time totalling 2,535 lost hours project costs of almost 130,000 euros.
We must consider minor accidents, too. These are accidents that don’t lead to downtime, but cause delays and disruptions in the production process.
If we follow the conditions assumed in the Dupont accident triangle, there are 10 times more minor incidents than accidents with downtime, and 10 times more near misses and critical situations. The cost of this is of course, difficult to predict. At this point, to support the argument and create a better overall picture, it’s a good idea to provide another example and calculation.
Calculation Example
If, due to the high number of work delays and assuming the same costs as for accidents at work, the total costs of accidents and near misses amounts to around 260,000euros. That means that the accident cost is 1,300 euros per year, per employee.
- These additional costs may not have been taken into account:
Contractual penalties due to late fulfilment of the order - Repair or replacement of machines and equipment
- Clean-up work
3. a safety management system (SMS) pays off
An organization can minimize costs that are directly associated with occupational accidents by introducing a suitable safety management system (SMS). If you haven’t yet introduced an SMS, a calculation example can help back up your argument.
Successfully implementing an SMS begins with introducing, implementing, and testing four central elements of occupational health and safety:
- Risk assessments
- Safety instructions
- Learnings
- Testing of equipment
In the risk assessment, evaluate and identify the risks of individual activities. Be sure to include ideas and planning for measures that the company can implement. Think of working conditions in the workplace such as ergonomics, lighting, climate, or physical stress. Not every measure is feasible. Nevertheless, it is advisable to assess factors holistically with regard to preventive occupational health and safety.
In the safety instructions, discuss all hazards at the workplace, and explain measures for prevention or minimization. In some cases, exercises with equipment or with the use of personal protective equipment (PPE) are also necessary. Those responsible are encouraged to subject instructions to an effectiveness check.
In the training sessions, discuss all risks that can arise at the workplace collaboratively and formulate actions to prevent and minimize. In some cases, exercises with company equipment or PPE may be necessary. Responsible parties should evaluate the effectiveness of such trainings. Written proof of training is also required.
As part of a risk assessment, specify an interval and scope of the testing of equipment. These come from the manufacturer's specifications and official requirements for plant safety. Additionally, note the competence of the examiner in the risk assessment.
All four elements require documentation in which the people responsible and implementation dates are specified. The improved organization of occupational health and safety protects the company from unnecessary costs.
Presenting a solid plan for the use of SMS to management and leadership will enhance the probability that your project will be taken seriously.
Calculation Example: SMS
Assuming that the introduction of the SMS incurs costs of 25,000 euros and thus reduces the accident costs (of 130,000 euros) in the first year by only 10%, the investment in our example company has already been returned after two years. However, a realistic target should be a much higher rate of reduced accidents at work.
4. why reputation is at stake
In addition to the major factors that play a role ( RoP, the costs of occupational accidents, and SMS), minor factors can also help your argument. Specifically, occupational health and safety can have a significant influence on the way others view the company.
Image and reputation are central 'value drivers' for management today. Stakeholders expect companies to take responsibility, and work to ensure occupational safety along the entire value chain. Inadequate occupational health and safety can lead to employees or external parties reporting on abuses in social media – and thus quickly reaching the public at large. If there are fatal accidents, a factory that collapses, or other critical incident, a company will have to manage serious crisis communication.
In these situations, the media response often lasts a long time. The consequences can lead to long-term loss of sales and liquidity. If legal proceedings are initiated, further costs may follow. These types of public crises are particularly sensitive for public companies. The financial markets are very sensitive, and have long been influenced by the media. Occupational health and safety, on the other hand, becomes holistic, and measures ideally go beyond legal regulations. A good health and safety record supports the good reputation of a company. It’s image driver that can be integrated into reputation-promoting CSR communication.
5. employee recruitment and corporate branding
The responsibility a company assumes for its employees’ health and safety has an immense effect on the satisfaction and retention of the workforce, and on the recruitment of new employees. One thing is clear: healthy workers are more motivated. In view of the current shortage of skilled workers, this argument is gaining additional weight.
If the usefulness of this argument isn’t convincing enough, you can also evaluate this factor monetarily. Employee retention is cheaper than recruiting. High turnover requires constant recruitment, which results in high costs. Non-monetary costs include the loss of knowledge, time for personnel recruitment, and resources for the induction of new employees. Equally important is a loss of sales due to employee shortages.
Prepare and conduct conversations for convincing managing directors
Many measures for occupational safety and health don’t require persuasion, as they are legally binding. Most protective equipment is a prime example. However, if you would like to invest in a large asset, such as an SMS, you’ll first need management approval.
You can use the usual sources to prepare your argument, such as literature and the internet. You should also contact other institutions and individuals that are involved with occupational safety and health. These include:
- The company doctor (occupational physician)
- The safety officers / specialists for occupational safety
- Other experts (e.g. hazardous substances officers, environmental management officers, waste officers, etc.)
- Works Council/trade union
Once you’ve developed a comprehensive plan and numerous strong arguments, the next step is to prepare for the conversation. Managers often have precious little time. Therefore, describe your concern briefly and concisely, but comprehensibly.
When communicating with management, it’s important to consider the following:
- Focus on the benefits of the desired measures for the company and its employees.
- Prepare several variants of an implementation plan (if possible two or three).
- Explain the advantages and disadvantages of each alternative.
- Be transparent about the costs, but also highlight the advantages with a calculation.
- Be prepared for questions, and also for resistance from the leadership ("Is this necessary?", "What laws or regulations dictate this?" "Can we implement it differently for a lower cost?").
- Arrange binding deadlines and define responsibilities for the implementation of the adopted measure.
- Create a summary document containing all the important points.
The conversation could result in you being referred to the appropriate department to discuss further details. In this case, ask the managing director or the plant manager to inform the department or the person responsible about the upcoming meeting.
Communicating with the specialist department
Here, too, a certain preparation for the conversation is necessary. That discussion will differ from the one you had with the manager.
- Preparing for your conversation with specialist departments
- Avoid professional paternalism, try to take on a consultant role.
- Take advantage of the expertise of your interlocutor, involve him/her.
- Allow new ideas and proposals, as long as they are conducive to the achievement of the measure's objectives.
- Ask for necessary help and support from other areas or departments.
- Agree on a binding timetable for the implementation of the measure.
- Discuss an appropriate time to monitor effectiveness.
Many of the elements of your conversation with management can also re-appear in the specialist department discussion. Once again, it’s crucial to communicate the advantages and benefits the measure will bring to employees. Use your experience from the conversation with the plant manager, and explain the benefits and advantages that the measure brings for each type of employee.
To keep everyone’s attention, it’s important to use simple and understandable language. Create a dialogue atmosphere, and remember that the measure will only be implemented successfully if it’s understood and accepted by the employees.
employee health and wellbeing matters in business
As you can see, several tools are available to help represent occupational health and safety support in a positive light. The arguments range from "major" calculation examples to minor factors that have an indirect effect on profits. However, occupational safety should always be considered holistically. The arguments mentioned are certainly only a small part of it. While compliance with laws and financial statements are important, ethics also matter: companies have a responsibility to safeguard the health and safety of employees.
Applied correctly, the arguments and approaches we’ve discussed will help you present the value of occupational safety and build a good business case. All levels of the company, from management to the very last employee, should recognize the benefits of well-organized and systematically applied occupational health and safety effort. Constant monitoring and improvement, with the participation of all employees, guarantees a committed implementation of all measures.
For any company committed to boosting both sustainability and profitability, caring for the planet, and for the workforce, is simply good business.