In this time of uncertainty in global markets, organizations are reevaluating their operations and looking to restructure or reduce costs. While many critical investments keep your business running no matter the market conditions, perhaps none are as important as the one you make in workplace safety.
Instead of looking at environment, health, and safety (EHS) programs as cost centers, now is the time to double down on the long-term benefits these programs can bring by measuring and showcasing the robust return on investment (ROI) they can deliver. Seen this way, continuing safety programs is a way to protect the bottom line—not something that adds to it.
High Stakes, High Costs
Workplace injuries and fatalities cost the U.S. billions of dollars annually, according to the Occupational Safety and Health Administration (OSHA). These events are categorized as direct and indirect costs.
Direct costs can include medical expenses, wage indemnity, claims administration fees and OSHA fines. But they’re just the tip of the iceberg. For every dollar a business may lose in direct costs, indirect costs could be double—or more.
Indirect costs can include litigation, schedule delays, damage to reputation, damaged equipment, lost productivity and quality, and retention of talent. That last one can be especially expensive in a tight labor market.
Let’s get specific on what these numbers could mean to an individual business. For example, the direct costs of a fatal workplace injury could cost $1.31 million. The indirect costs of workplace disruptions, loss of productivity, worker replacement, training, increased insurance premiums and attorney fees could total $1.44 million. This number is calculated by multiplying $1.31 million by 1.1, which represents the cost multiplier for direct costs of $10,000 or more when time and materials are taken into consideration. Altogether, a single fatality could cost a business $2.75 million.
In simple, but stark, terms the direct and indirect costs associated with workplace injuries and fatalities can have a major impact on a company's ability to be profitable—or even stay in operations. Put this way, safety programs that can reduce even a single injury or fatality represent significant savings for companies. And, on the whole, there’s plenty of opportunity for companies to improve.
There were 4.26 million medically consulted work-related injuries in 2021, according to the National Safety Council’s (NSC) analysis of the Bureau of Labor Statistics (BLS) Census of Fatal Occupational Injuries (COFI) report. Each injury cost approximately $44,000.
In addition, there were 5,190 fatal work injuries in 2021, according to the BLS. That means a worker died every 101 minutes from a work-related injury over the course of the year. But perhaps what’s most alarming is that the NSC estimates 4,472 (86.2%) of those fatalities were preventable. Perhaps unsurprisingly, construction is the industry with the most preventable fatalities.
The data clearly shows that prevention is key to avoiding harm to your employees and foregoing increased costs of doing business. If you want to improve your record, you must first invest in your safety program.
Safety Programs are a Business Imperative
Unfortunately, even today, many companies still view their workplace safety programs as a cost center rather than a business imperative. During times of economic uncertainty, one of the best ways to protect your bottom line is through continued investment into your safety program.
Too often, companies choose to slash workplace safety programs as the first measure taken to reduce costs. What’s more, expanding and emphasizing safety programs may be one of the last things companies do when they experience growth.
There are expenses associated with offering safety training, but the costs—and subsequent savings—are difficult to see on a profit and loss (P&L) statement. Safety training program expenses can include staff time, consultant fees, equipment purchases and production delays (i.e., employee downtime for attending training sessions). Those are clear, upfront investments.
However, calculating the ROI in response to these services can be difficult for many companies. For example, the only immediate benefit business managers might see is that workers do not receive an injury due to their increased safety awareness. In addition, they might assert nothing can be measured besides expenses related to a hypothetical injury.
Of course, they are wrong.
To show them why, you need to make a compelling argument for the implementation or continued existence of your safety program by linking their EHS functions to your company’s business value objectives, as shown in the chart below. This snapshot is a helpful tool we use at Wesco with customers that combines both our approach and lessons learned, as well as various industry metrics.
Making the business case can be as simple as showcasing how safety training is a business imperative, emphasizing its ability to increase productivity while mitigating compliance risk. These business operations function as a direct result of the EHS tasks. For example, demonstrating how the proper personal protective equipment (PPE) can benefit the business by reducing compliance risk, boosting profits and protecting business reputation, all while reducing worker injury or illness, will underscore the very real value these programs can provide to the bottom line.
Once you have made the connections between your safety program’s functions and your company’s business objectives, you can demonstrate ROI to your executives. This is especially relevant given the current state of economic uncertainty and the ongoing labor shortage.
Emphasize to your senior leadership team that safety can no longer be considered a cost center; rather, it is a strategic imperative to the business that not only keeps workers safe on-site but is also a productive conduit to business operations. Speaking to this executive audience in a language they understand—dollars and cents—is the key to building consensus.
In addition, a strong safety program with a proven track record of excellence is a competitive advantage, both now and in the future. Today’s customers have high expectations regarding corporate social responsibility and workplace safety. For instance, organizations are required by law to dispose of hazardous chemicals properly. The employees tasked with this responsibility must know how to execute the task—and they must also know how to do so safely and ethically.
Having an environmental, social and governance (ESG) strategy that invests in safety programs allows your company to emphasize its employees’ well-being, proven performance record and continued relevance in the market. Perhaps this is why EHS has been credited as the foundation to the success of any ESG program. Safety programs offer tangible tasks and initiatives that can help organizations take concrete steps to align their operations with ESG goals and improve their ESG rating.
The Evolution of Workplace Safety Programs
The goal for any business focused on creating and maintaining an effective safety culture should always be zero incidents, injuries and illnesses. Your company is responsible for getting your employees home safely every day, no matter where they work or what they do.
However, the process of building and maintaining a world-class safety program remains an arduous one. Thankfully, new technologies have emerged to help further your efforts.
Examples of these solutions and their use cases include:
- Video analytics can identify trip hazards and spills, evaluate occupancy requirements, ensure compliance with regulations, and assess ergonomics and PPE compliance.
- Wearable devices can provide immediate haptic feedback to users based on their unsafe motions, thereby helping to prevent injury and provide critical training in real-time. Wearables can also assist in tracking and managing expensive equipment, such as fall protection devices, and provide notifications for when these items must be taken out of service or inspected.
- Environmental sensor technologies can monitor Indoor Air Quality (IAQ), floor sweat detection (i.e., dew point), leak detection and more.
- Robotics can handle walk-around visual measurements, thermal inspections, toxic atmosphere monitoring and more. They can assist with hazardous or difficult tasks; detect and respond to human movements; and perform repetitive, physically demanding tasks to reduce the risk of injury and fatigue for workers.
- Safety management software helps businesses manage their safety program and assets and track metrics associated with their EHS efforts.
We found the benefit of these technologies in one of our own Wesco warehouses. In 2021, Wesco’s EHS team assessed how wearables could ensure safety and reduce risk within our warehouses. The team focused on movements that can have negative effects and often result in spine strains, such as awkward static posture, poor bending, back twisting, repetition and intense bending.
By working with a third-party vendor, we developed an Internet of Things-based pilot program that provided warehouse employees with a wearable that was placed on the back of their shirt. The device alerted employees via vibrations and beeps any time a hazardous movement was detected. To make the device stop beeping or activating, employees had to adjust their posture and stand, bend or move differently in real-time, providing “active education” for employees.
During the pilot, we observed that in a three-week period, one of our primary warehouses experienced remarkable results: Over 60% of workers lowered their average hazards per hour by at least half. As a global business, we continue to prioritize EHS efforts, such as through pilots, investments in our safety programs and maintaining our safety culture. At Wesco, our employees are safe by choice, not by accident, and we know that our ability to protect our workforce is paramount to our business’s continued success.
As the landscape of workplace safety continues to evolve, many businesses are eager to apply technology within their workplaces to help decrease warehouse hazards, avoid costly fines, and improve employee productivity and well-being. These technologies deliver the much-needed data and analysis that are critical to illustrating and identifying existing gaps in your current safety program. This information can help you make impactful changes and ultimately save your business real dollars and cents.
At the end of the day, companies must do more than talk about a comprehensive safety program. They need to truly walk the walk because employees, shareholders and customers are keeping a watchful eye.
Safety is an iterative process, and there is always room for improvement. While it can sometimes be difficult to calculate ROI, safety always pays dividends to any organization. By working with your management teams to help shift the safety mindset from one of a cost center to one of strategic business value, you can position your organization for EHS success and benefit the bottom line.
Shawn Gregg is vice president of global safety for Wesco, a multinational supply chain and distribution services company. He started his career as a safety engineer and over the past three decades has focused on producing and delivering innovative safety solutions and programs to keep workers safe. He brings deep experience in key end markets, such as manufacturing, along with first-hand industry knowledge and technical expertise in industrial safety. A Minnesota native, Shawn earned his bachelor’s degree at Bemidji State University and his MBA from the Keller Graduate School of Management at DeVry University.
