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Studies show Health and Safety could make you a stock market winner

As health and safety professionals we are challenged with an internal perception that safety is a cost centerparticularly when you ask to invest in health and safety technology.  

Bull and Bear - Marissa NA-02

 

After all, it can be seen as expensive with no apparent profit. So we may feel inclined to check off government mandates for workplace health and safety with a cursory nod.  

  • Do you have clean and organized rooms and passageways?
  • Dry floors?
  • Sturdy furniture and working equipment?

In a world of checkboxes, investing in health & safety solutions might not be at the top of the priority list. However, research shows us it should be.  

Resources gathered by the US Department of Labor assembled a clear business case for safety management, showing how managers could expect to make significant long-term cost savings through accident prevention. Over and again, researchers found that some of the richest and most successful companies were those that invested in health and safety measures. One of the most frequently quoted studies concluded that “companies that build a culture that focuses on the well-being and safety of their workforce may yield greater value for their investors”. The evidence seems conclusive: Best-run companies are safe and, consequently, successful.

The studies on why it is crucial for businesses to invest in health and safety

In 2016, researchers contrasted the stock performance of winners of the North American Corporate Health Achievement Award (CHAA) against the performance of the S&P 500 over a 13-year period and found that the index returns of these “healthiest and safest companies in North America” tracked a consistent 333 percent, in contrast to the average S&P 500 returns of 105 percent!

Two years later, an international team of researchers mapped a 1945-2018 review of relevant companies across a number of indexed journals and found that some of the richest and most successful companies were those that invested in health and safety.

“Firms,” it concluded, “that invest in occupational safety often have better financial performance than those who do not ... This study’s findings underscore the financial gains firms can obtain by promoting occupational safety measures in their organizations.”

There are various reasons for their success. One is that workers are simply repelled by companies with high levels of accidents and high-stress levels. In fact, the American Institute of Stress notes these companies increase their workplace turnover by almost 50%. Businesses, in contrast, that are known for their workplace safety, give their owners a recruiting edge. Another is that good H&S drives efficiency through downtime reduction. It also reduces worker absenteeism, and overall, improves operational efficiency. To that end, Gallup shows that organizations with 70% fewer accidents than average usually rated in the top 25% for worker engagement than those in the bottom 25%.

Improving safety can save you money

A quick look at the cost of workplace injuries and the potential return on investing in accident prevention shows that a safe and healthy workplace could be a profit center.

Injury costs can’t be depreciated, written off as business losses or deducted as expenses. If you lose a certain amount of revenue from injuries, illnesses, or damage, you’d need to earn double as much for profit.

Workplace accidents involve both direct and indirect costs. Direct costs include:

  • Medical expenses, such as the costs of hospital stays, medicine, therapy and ambulance rides.
  • Compensation payments
  • Costs for legal services

The National Safety Congress calculated that in 2019 a single fatal injury costs $1.2 million. That does not take into account the impact on morale or brand reputation!

Indirect costs are usually more expensive and are worked out on the ratio of two dollars for every one dollar indirect costs. Indirect costs include training replacement employees, accident investigation and implementation of corrective measures, lost productivity, repairs of damaged equipment and property, and costs associated with lower employee morale and absenteeism. These costs could damage your brand and usually result in lost customers, lost opportunities and lost profits.

Costs for investing in health and safety

The costs for investing in accident prevention are laughable in comparison. They include the following:

  • According to the National Safety Council (NSC), the total cost of workplace injuries was $171 billion and the cost per worker was $1,100 (which includes the value of goods or services each worker must produce to offset the cost). 

  • A fracture to an employee has a total cost of ~$115,000 (according to the OSHA Safety Pays calculator). When considering how much the organization has to sell to cover this cost, you are looking at ~$1.4 million.
     
     
  • Finally, imagine a new safety training program that costs $70,000 to implement but yielded a 10% reduction in incidents and a total savings of $250,000. The potential ROI of that simple program could be 257%.  

In short 

Companies have a phalanx of dreams to invest in. For most of us, health and safety comes as that very last acquisition. Meanwhile, studies show it makes sense to push it to the front of the line. Additionally, most respondents (54%) told EHS Today that the benefits of their health and safety program exceeded its cost. In the long run it’s a small price to pay for saving lives, reducing injuries, and increasing your profits. 

Ready to see how health and safety technology can help? 

Health and safety technology makes it easy to manage, track and report your safety risks, manage all your regulatory compliance and enterprise risk from one single pane of glass, track your workplace engagement, and manage, track and report your safety risks.  

Schedule your demo!