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Can Occupational Health & Safety Be a Profit Center?

Industrial safety and profit are typically viewed as inversely related. But with the right approach, occupational health and safety can yield a positive return on investment. 

Businesses have considered safety an obligatory cost center for about as long as industrial workplaces have been regulated. However, if the costs of safety are analyzed in the right context, solutions start to appear that can change the narrative about safety investment as a necessary expense to be tolerated.

Evidence already suggests that a dedicated investment in occupational health and safety correlates with better financial performance. A 2016 study in the Journal of Occupational and Environmental Medicine found that companies in the S&P 500 that had been recognized as health and safety leaders saw stock values appreciate by 325% between 2000-2014. Meanwhile, the market average appreciation was just 105%.

The report concluded, “This study supports prior and ongoing research demonstrating a higher market valuation — an affirmation of business success by Wall Street investors — of socially responsible companies that invest in the health and well-being of their workers when compared with other publicly traded firms.”

Publicly traded or not, a deliberate approach to safety and safety management can help a company perform better in many ways, including financially. 

How To Move Safety from Cost Center to Profit Center

Some of the costs related to safety are fairly fixed and simple to calculate. Overhead of your safety personnel roles and PPE are examples of these fixed costs. Other direct costs can vary greatly, such as medical bills, regulatory fines, insurance premiums, and downtime when an incident grinds processes to a halt. Indirect costs, like damage to your brand or reputation, can be impossible to calculate.

To move safety investment into a profit center, OHS must become a pillar of the culture and operations. You will need more than a plan – you’ll need a program. This program must be capable of assessing lagging indicators like injuries and documentation of incidents as well as identifying leading indicators like training, inspections, and action items to reduce the number of incidents within the lagging indicators.

Additionally, you’ll need to establish a framework that connects all the actions to objectives. Doing so will allow staff to understand why certain actions are being taken (e.g. why the trainings, why the inspections, etc.).

Moving safety from cost to profit is about far more than just being compliant or reducing the number of incidents. Ultimately, as safety becomes a core component of all tasks, it’s no longer a separate function, but a natural element of the working environment. It isn’t easy, nor a straight line to success, but with the right implementation (such as outsourcing your total safety management to a dedicated provider like SITEX) the business will start to see the financial (and other) improvements.

How Safety Can Improve the Bottom Line

The direct costs associated with safety will always be expenses, but if those expenses are proactive and deliberate, they will yield a net positive return in the end.

Eliminating Direct Costs of Incidents

Probably the most obvious impact on the bottom line will be avoiding the costs connected to accidents, such as medical expenses and paid time off for injured employees, as well as costs to replace or fill that role in the worker’s absence. Though these expenses will vary greatly depending on the circumstances, OSHA does have a tool that can help businesses understand the financial impacts of safety accidents. You can check out the Safety Pays tool here.

Reducing Downtime

Accidents can also impact production schedules. Many incidents cause partial or full shutdowns, and downtime can be a business’s worst enemy. Fewer (or better yet zero) accidents not only saves on direct costs, but avoids unscheduled delays.

Improving Your EMR Score

A significant way to reduce safety overhead is to improve your company’s Experience Modification Rate (EMR). This critical metric is used by insurers, including workers compensation, to estimate the likelihood of a business filing a workers compensation claim. A lower EMR can shave major dollars off your insurance premiums – a direct impact on the bottom line. Accidents and incidents have a negative effect on the EMR, so protecting your EMR becomes directly linked to protecting your employees.

Avoiding Costly Fines or Penalties

Regulatory actions, commonly in the form of fines, can be crippling to businesses. Compliance is obviously a major component of safety management, but can sometimes be hard to maintain when a safety program isn’t comprehensive and proactive. Falling out of compliance can add up quickly. With this year’s adjustment, OSHA penalties have moved to $15,625 per violation, with willful or repeated violations now costing $156,259 each.

Avoiding Litigation

Whether brought on by a regulatory agency or by an affected employee, litigation over accidents can wield a hefty price tag. Even when the company may not be at fault or has a solid defense case, legal proceedings cost money and time – and can also cast a negative cloud on the brand and reputation.

Improving Overall Efficiency and Performance

A proactive and well-executed safety program does more than avoid negative costs. The right safety management promotes better overall performance. When workers feel safe and appreciated, morale goes up. With better morale comes better efficiency and quality of work, as well as reduced churn within your staff. 

Being Compliant Is Never Enough

Just being OSHA compliant doesn’t make you a safe company, and it won’t move your safety function from cost to profit. However, implementing a comprehensive and proactive safety program is not a sprint and requires knowledgeable planning and execution. Outsourcing your safety to a company that is capable of focusing on the right measures to take and execution of those steps can help you get there.

SITEX offers a complete range of occupational health and safety services, including a retainer-based Total Safety Management approach that can ensure your company is among those shifting safety from a tolerated expense to a differentiator for success. To speak with one of our experts about how we can turn your safety program from cost center to profit center, fill out the form or call us at xxx-xxx-xxxx.

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