www.iapa.ca

Making a Case for Health & Safety
We know that health, safety and environmental programming is a corporate
economic imperative. Increasingly, so does the business community.
MAKING A DIFFERENCE SINCE 1917
By:
In Southern Africa, mining powerhouse Anglo American offers
free antiretroviral treatment to HIV+ employees. The average
annual cost of the treatment per employee exceeds the average
annual income of most black workers.
Halfway across the world, a DaimlerChrysler Canada
automotive assembly plant introduces a program to improve
employees’ cardiovascular health. Half of the participants lose
an average of 16 lbs. (7 kilos), and one in three smokers stops.
Overall, participants reduce their long-term risk of heart disease
from moderate to low.
The connection: the corporate bottom line.
Anglo American expresses its rationale for the free treatments
strictly in the language of business. The cost of these
treatments, says Anglo American, is more than offset by lower
absenteeism, reduced health care, greater retention of skilled
employees, and improved productivity.
DaimlerChrysler also takes a business approach, estimating that
expanding the cardiovascular health program to all Canadian
operations would save CDN$2 million over 10 years.
Such examples place companies like Anglo American and
DaimlerChrysler Canada well along on the continuum of health,
safety and environmental programming. They have learned it’s
possible to do good and do well at the same time.
So have others. A 2007 survey of top executives around the
world found that 9 out of 10 respondents are incorporating
environmental, social and governance issues into their firm’s
core strategy more than they were five years ago.1
Maureen Shaw, President and CEO
Jim Armstrong, Director, Consulting Services
Catherine Rae, Manager, Synergration
IAPA (Industrial Accident Prevention Association)
>senior executives who participated in an April 2007
IAPA Leadership Forum
>the practices of international corporate leaders
>hands-on experiences of IAPA member firms
But first, facts and figures that create a financial context:
>the ILO estimates annual global losses in gross domestic product (GDP) due to workplace illness, injury and death
at $1.25 trillion (US $1,250,000 million), or 4% of annual
global GDP2
>between 1998 and 2004, the real cost of workplace injuries causing US employees to miss six or more days from work
rose 8% even though the number of injuries fell 18%3
>in 2005, workplace injuries cost US businesses $150 billion in direct and indirect costs, exceeding the combined profits of
the 16 largest Fortune 500 companies4
>poor health among US workers accounts for US$260 billion
in lost productivity per year because of increased
absenteeism and “presenteeism”— deteriorating job performance in the form of less stamina, poor concentration, and more errors and injuries.5 GM alone reportedly pays out US$1,525 in health-care expenditures for every car produced
— more than the cost of the steel in the car
>absence due to employee illness and disability costs
Canadian companies CDN$16 billion annually6
>lost productivity due to mental illness costs Canadian companies CDN$11 billion annually7
What’s driving business leaders to invest corporate resources
—and potential shareholder earnings—into safety, health
and environmental programs? To explore these questions,
we’ve drawn on a number of sources, including
www.iapa.ca
Making a Case for Health & Safety Barriers to improving health and safety performance
September 2007 4.no metrics exist to measure and depict HSE performance
and value
“No one,” points out WorkSafe BC President and CEO David
Anderson, “wants to be the CEO of an organization in which
someone dies.”Anderson, head of the government agency
responsible for workers compensation and injury and illness
prevention in British Columbia, Canada, made this observation
during IAPA’s 2007 Leadership Forum.
5.no standard terminology exists to explain HSE performance
6.the HSE and financial departments have no common
language to describe the impact of HSE on financial results8
Overcoming barriers
Nevertheless, somewhere in the world someone is injured or
killed at work every eight seconds. Why such a gap between
what we want and what goes on?
Despite the real or perceived barriers described above, there are
encouraging signs that the business community is recognizing
health, safety and the environment as a business imperative:
Companies face many perceived economic obstacles. In the
developed world, these challenges include:
>CEOs are taking on HSE as a measure of their own performance. For example, Patricia Woertz,
ranked fourth in Fortune magazine’s 2006 list of the 50
most powerful women in business, has the achievement of workplace safety goals as one of three criteria on which her compensation package is based. Woertz is President and CEO of US ethanol producer Archer Daniels Midland Co., and believes that a safe workplace is a prerequisite to organizational success.
>shareholder demands for solid short-term financial returns
>a steady movement of manufacturing operations and jobs to countries with transitional economies
>competition with cheaper goods produced offshore
>labour shortages in high-growth sectors
In transitional economies, companies may face
>businesses are publishing their HSE results. Are there any corporate websites that don’t have a corporate social responsibility mission statement or, better still, an annual sustainability report?
>a lack of government will to establish or enforce standards
>political and/or social instability
>outdated or inadequate infrastructure
As international trade and migration continue to expand,
companies in developed and transitional economies also
face potential clashes of cultures, performance standards and
expectations, both abroad and at home.
Under these circumstances, companies may be tempted to
make cost cutting a top priority. When cutting costs, research
shows, companies at the lower end of the health, safety and
environmental (HSE) continuum often start with HSE programs.
What makes HSE expendable?
>investors are acting. In spring 2007, following
declines in Canadian National Railway Co.’s HSE performance, two Canadian mutual fund investment firms challenged the railway’s decision to award its CEO a bonus of US$3.85 million. Both investment firms are shareholders. Such investment activism is a worldwide phenomenon. In April 2006, the UN Global Compact and the UN Environment Program Finance Initiative helped to launch “Principles
for Responsible Investment.” These principles encourage investors to incorporate ESG issues into their investment decision-making and ownership practices. Within one year, 170 institutions representing US$8 trillion in assets
had committed to the principles.
1.management does not consistently commit to HSE programs
2.management considers HSE an expense, and does not see the benefits of ongoing investment
3.no communication or contact exists among management,
the HSE department and employees
2
September 26, 2006
>financial analysts are watching. Asset managers,
pension trustees and stock exchanges are increasingly scrutinizing environmental, social and governance (ESG) performance. According to the UN Global Compact, the world’s largest corporate citizenship initiative, “companies that proactively manage ESG issues are better placed
vis-à-vis their competitors to generate long-term tangible and intangible results—and therefore are better investment bets.”
>a loss of traditional sources of workers (e.g., through AIDS or the elimination of child labour); in others, a surplus of
workers willing to work at any wage
Making a Case for Health & Safety September 2007 Few businesses may function on the scale of an Alcan, but
that doesn’t mean returns on investing in health, safety and
wellness are out of reach.
>the media are reporting. ESG and the stories behind it are big news. In Canada, for example, the national
Report on Business magazine publishes an annual review of corporate ESG performance. Petro-Canada, just one of the companies cited in the 2007 review, received an A- for its handling of employee and social issues, including work/
life balance and diversity. “The company has expanded parental leave, job sharing, flexible work hours and paid days off for family care,” reports the magazine. Mainstream media is also paying attention. Googling a March 2005
refinery fire in Texas that killed 15 workers and injured 180 generates 260,000 hits. The coverage initially focused on injuries and fatalities, but quickly morphed into
reports on corporate performance, stock market implications, investigations and inquiries, prosecutions, and civil suits.
More than 300 firms in Ontario, Canada, many with 500
employees or less, have earned sizable rebates on workers
compensation premiums under a “Safety Group” program
facilitated by IAPA. Participating companies meet in small
groups, choose four elements of a health and safety program
that each will build into its existing programming over the
coming year, and support each other in the pursuit of their
goals. In 2005, these firms reduced their lost-time injury rate
by 27% and their overall injury severity rate by 29%, earning
a collective rebate of more than $2 million.
Improving health, safety, and environmental performance can
also offer companies benefits not traditionally associated with
corporate social responsibility:
>regulatory penalties and civil awards are growing.
That Texas refinery fire, for example, led to a regulatory fine of US$21.3 million.9 The company has also put aside US$1.6 billion for lawsuits.
>greater productivity and reliability. For instance,
Johnson & Johnson reduced ergonomic risks on a production line in its Janssen-Cilag facility in Mexico by 48%. The changes improved productivity by 20%, and now
save US$50,000 annually.12
Financial returns from investing in HSE
>new competencies. Preventing health, safety
and environmental incidents may help build managerial competencies because prevention efforts require employee involvement, organization-wide coordination, and a forward-
thinking managerial style.
Greater scrutiny of corporate safety, health and environmental
performance results in part from data documenting financial
returns from improved performance. Over 60% of chief financial
officers recently surveyed by Liberty Mutual said that each $1
invested in injury prevention generated returns of $2 or more.
The US Occupational Safety and Health Administration (OSHA)
asserts from its own evidence that companies implementing
effective safety and health programs can reduce injury and
illness rates by 20% or more, and generate a return of $4 to
$6 for every $1 invested.10
>enhanced organizational capacity. Prevention may lead to better processes, information systems and environmental scanning skills, which encourage more efficient use of resources, help management anticipate and respond to external changes and emergencies, and protect against business interruption.
It gets better. Aluminum giant Alcan reports that as of 2005 its
environment, health and safety management system EHS FIRST
delivered US$43 million in benefits, mostly from safety. The
estimated value at stake for environmental and health issues
is more than US$1 billion.11 Consider these health and safety
performance indicators from 2005:
Combined, these three benefits can offer companies a
competitive edge. Mike Fenuta, operations manager for
Steelcase Canada Ltd., a global leader in workplace furniture,
agrees that health, safety and environmental performance is
a differentiating factor. “As more clients are taking a holistic
approach in evaluating companies,” says Fenuta, “it does give
you a competitive advantage.” Steelcase is a 2007 President’s
Award winner, IAPA’s highest safety honour.
>a recordable injury case rate of 1.5/100 employees,
down 70% from 2001
>a lost time injury/illness rate of 0.54/100 employees,
down 69% from 2001
>a 43% drop in work days lost since 2001. Alcan calculates that this alone saves the company US$14 million annually.
Alcan, operating on a global scale, has 68,000 employees in 61
countries and regions. In 2006 the company reported revenues
of US$23.6 billion.
3
Making a Case for Health & Safety September 2007 But there are more benefits:
>better employee relations. According to Marc Neeb, a Magna International Inc. participant in IAPA’s Leadership Forum, “What our employees want to know at the end of the day is that there is a real concerted effort on behalf of the company to make sure they’re working in a safe environment. And if you’re doing the best that you can, employees recognize it right away.” Marc Neeb is Magna’s Executive Vice President, Global Human Resources.
The automotive supplier, an IAPA member firm, has 236 production and 63 engineering and R&D centres in 23 countries on five continents.
2. profitable companies like Alcan can afford to invest
in HSE. The reality: safety helps to make Alcan profitable.
As Simon Laddychuk, Alcan’s Vice-President, EHS FIRST
and Sustainability, explained at IAPA’s Leadership Forum, “economic and social considerations are woven into how
we create a sustainable business.”
Alcan is not alone. In July 2007, investment banker Goldman
Sachs reported on the stock market performance since August
2005 of companies in four sectors—energy, mining and
steel, food and beverages, and media—that are leaders in
implementing environmental, social and governance policies
to create sustained competitive advantage. In all four sectors,
these companies outperformed the general stock market by
25%. Furthermore, 72% of these companies outperformed
their peers.13
WorkSafe BC’s David Anderson offers another perspective.
“One can’t say to the staff of an organization that ‘We pursue
excellence in everything we do, except your health and safety.’
If we say that, we’re either saying ‘It’s not true that we pursue
excellence’ or ‘We pursue excellence in the things that matter
to us and your health and safety doesn’t.’” Either way, says
Anderson, those are damaging messages.
Identifying common success factors
Many factors contribute to the success of these firms.
A number appear below.
>more public trust. Pity the manufacturer that
hasn’t assigned its Chinese suppliers detailed product safety specifications. Repeated exposés of substandard business practices among Chinese manufacturers have dealt a heavy blow to the entire country’s reputation, and forced
international recalls of millions upon millions of products—
everything from toys to toothpaste.
>Creating the right culture. According to the Conference Board of Canada, “the prevailing wisdom on how to create a motivated and productive workplace seems to amount to free sodas, beer or ice-cream socials every other Friday afternoon,
and offsite meetings at which the CEO acts like a cheerleader.”
David Hughes, IAPA Leadership Forum participant and President
and CEO of Habitat for Humanity Canada, says public trust
in the safety of its organization is critical to its success. The
Canadian nonprofit housing ministry’s parent, Habitat for
Humanity International, operates in 100 countries and starts
a new home every 24 minutes. Volunteers perform much of
the work. “If we have anything short of an impeccable safety
record,” says Hughes, “it would impact our ability to recruit
more volunteers, and of course that would affect funding. The
bottom line in all of this is that it would hinder our ability to
deliver more homes to more families in need.”
In David Anderson’s world, corporate culture means something
else. “I define culture as how we do things around here. Not
how we say we do things… it’s what we actually do. And it
starts at the top of the organization.”
David Hughes traces Habitat for Humanity Canada’s safety
culture to a policy-oriented discussion of regulatory compliance
and board member responsibilities. It has since evolved into “a
matter of culture, not of policy, and I think that has made all the
difference.” Health and safety, continues Hughes, “has become
a matter of organizational pride.”
>Setting your own standards and expectations.
“At Magna,” says Marc Neeb, “we have our own health, safety and environmental policy, and on an ongoing basis we review it to make sure that it meets the highest possible standards that we as a company feel should be met.”
Dispelling misconceptions
Better financial reporting of health, safety and
environmental benefits helps dispel two misconceptions
about HSE programming:
1. it’s a cost of doing business. The reality: it’s an investment offering a positive return on the company’s workforce, as well
as its bottom line. “The better your safety performance,”
says Steelcase’s Mike Fenuta, “the better your quality performance, resulting in better financial performance.”
4
Making a Case for Health & Safety Johnson & Johnson has also taken a “beyond compliance”
approach. “So powerful is this approach,” says the company,
“it was recently adopted as a Johnson & Johnson management
imperative for all business aspects.” Among the benefits: it
“optimizes products, processes and facilities by designing in
quality, safety, engineering and environmental standards,”
and “achieves operational excellence.”
September 2007 different parts of the company,” says Steve Griffiths, IAPA
Leadership Forum participant and Vice President & General
Manager of Petro Chemicals for Imperial Oil. “But at the
end of the day health, safety and environment is a line
management responsibility.”
At Alcan, “site managers are expected to take the lead and
spearhead major step changes in EHS performance at their
facilities. Line managers are expected to ‘own’ the process of
continual EHS improvement and to enable their employees to
play a meaningful and active role.”
Texas-based DynMcDermott Petroleum Operations Company is
another believer in exceeding regulatory compliance. Doing so,
says the firm, helped it reduce compensable injuries by 95%,
saving it US$500,000 annually in compensation costs alone.14
>Training employees. An “aware, trained and committed workforce” is a cornerstone of Alcan’s EHS FIRST system. Between 2003 and 2005, 13,000 Alcan employees participated in the system’s Leadership Competency Program. Training helps build commitment, says Simon Laddychuk. “It’s very important that we address the question ‘What’s in it
for me’ at every level, so that each employee can see why working to reach this vision of being a recognized leader
in everything we do and every way we operate is actually tangibly the result of their activity and their work.”
>Establishing an HSE management system.
Purpose: to facilitate a continuous cycle of planning, implementation, evaluation, and continuous improvement.
In 2001, Alcan began standardizing data gathering and
reporting at all levels of the organization and at each facility.
Regular monitoring and measuring helps ensure effective
controls, quantify improvement, conduct benchmarking, and
report on performance.
When IAPA member firm Maidstone Bakeries first opened its
doors in 2002, it too made HSE management an organizational
priority. With 300 new employees, Maidstone had no
organizational memory, internal benchmarks or acquired
expertise to guide it.
Waterloo North Hydro, an electrical energy provider in southern
Ontario and another participant in IAPA’s Leadership Forum,
builds HSE awareness and commitment by bringing together
employees from different levels and functions. “It would not be
uncommon in a training course… to have a complete mix of
employees,” says President and CEO René Gatien. “They include
front-line unionized staff, supervisors, mid-level managers,
right up to myself.” Company records reflect a knowledgeable
and committed workforce. In the last three years—600,000
work hours—Waterloo North Hydro has incurred no lost-time
compensable injuries.
>Integrating HSE into operations. “Everyone can talk about values,” says Alcan’s Simon Laddychuk. “The challenge is how you operationalize these values.”
Alcan’s rationale for taking on this challenge: “When we
have the opportunity to think about things in a much more
holistic way,” says Laddychuk, “we’re able to put a better
solution forward … We want to have excellence, and in order
to get there we think that the methodology of incorporating
everything into one infrastructure is the best way to get there.”
It’s an ongoing process. Alcan’s Primary Metal Group, for
example, recently began involving HSE specialists in the design,
planning and execution of all engineering activities.
>Integrating HSE into supply chain management.
“With more than $20 billion in annual spending on materials, goods and services,” says Johnson & Johnson, “we have a tremendous opportunity to improve conditions around the world. By leveraging our supply chain relationships and helping to bring about improvements in the way our
suppliers operate, we can have a greater overall impact
than we can by focusing solely on our own operational performance.”16
Offshore drilling contractor Noble Corporation has integrated
HSE and business management in a number of ways:
“through the capital budgeting process, the computerized
Noble Drilling Operations report, quarterly health, safety
and environment committee meetings, weekly worldwide
operations management conference calls, the SAP purchasing
and accounting system, rig standardization initiatives, safety
leadership workshops, and other programs and initiatives.”15
In 2006, General Motors, Ford, Daimler Chrysler, and Honda
focused their collective buying power on a specific challenge:
ridding the supply chain of materials produced by slave labour.
One of the most compelling means of operationalizing HSE is
to make it part of individual employee performance objectives.
“We have a health and safety organization that serves the
5
Making a Case for Health & Safety September 2007 A terrible toll in human suffering, and in business terms an
entirely preventable loss.
>Looking beyond financial returns when investing
in HSE. If companies build business cases solely on
numbers, they risk running into what HSE management consultant Thomas Cecich calls the safety paradox: “the better your safety and health performance, the more difficulty you’ll have justifying safety and health investments.”17
Nobel-winning economist Milton Friedman believes corporate
executives have only one social responsibility: to make as
much money as possible for their shareholders. Anglo American
believes it is doing just that when it invests in free antiretroviral
treatments for workers.
Magna International avoids this by looking at the bigger
picture. Says Marc Neeb, “We do not have a metric that
measures ‘If you do the right thing on the HSE side, how does
it tie in to the bottom line in terms of hard dollars.’ Financial
people would probably like to see those numbers. Our position
us pretty simple: if you create the right work environment,
and you treat people properly, the bottom line will
automatically improve.”
The challenge facing the rest of us is how to communicate our
understanding, and our passion, in a language that our business
leaders can act on. It’s time to start promoting health, safety,
wellness, and the environment as the business imperative that
we intuitively know it is.
We invite you to use the statistics and examples of corporate
leadership described in this paper when formulating your own
communications. It’s time to make the language of HSE the
language of business.
Despite dramatic successes achieved by many companies,
enormous challenges remain. The ILO reports that, worldwide,
270 million occupational injuries and 160 million work-related
illnesses occur annually. This year alone, fully 15% of the
world’s population will suffer a minor or major workplace injury
or work-related disease.18
One voice is a single person. Many voices are a movement.
6
Making a Case for Health & Safety September 2007 Notes
Source: United Nations Global Compact, an initiative established in 2000 to encourage businesses worldwide to adopt and report on sustainable and socially responsible policies. Under the Compact, companies are brought together with UN agencies, labour groups and civil society; http://www.unglobalcompact.
org/.
1
Safety Culture at Work. Safety in numbers - Pointers for a global safety culture at work, International Labour Office, Geneva, 2003. ISBN 92-2-113741-4; http://www.ilo.org/wow/Articles/lang--en/WCMS_081326/index.htm.
2
Liberty Mutual Group, http://www.libertymutual.com/omapps/ContentServer?cid=1138344114861&pagename=ResearchCenter%2FDocument%2FShowDoc
&c=Document-2.
3
4
Liberty Mutual Research Institute for Safety home page, http://www.libertymutual.com/research-institute-report2005/html/index.html.
Rifkin, Jeremy, “Diseases of the affluent; Canada must move from treating disease to promoting wellness in order to improve its economic productivity,
” The Globe and Mail, May 16, 2006.
5
6
Watson Wyatt 2002/2003 Staying@Work study, http://www.watsonwyatt.com/canada-english/pubs/stayingatwork/
Shain, Martin et al., Mental Health and Substance Abuse at Work: Perspectives from Research and Implications for Leaders, a background paper prepared by the Scientific Advisory Committee to the Global Business and Economic Roundtable on Addiction and Mental Health, November 14, 2002.
7
8
McKinnon, Ron. “Managers Don’t Know About Safety,” The Compass, Vol. 2, No. 1, pp. 1, 4-6.
“BP Texas Refinery Accident Lessons Learned,” a speech by John Mogford, BP Senior Group VP, Safety and Operations Texas, delivered at a May 2006 at an Industry Process Safety Conference; http://www.bp.com/genericarticle.do?categoryId=98&contentId=7017238.
9
10
ASSE White Paper Addressing the Return on Investment for Safety, Health, and Environmental (SH&E) Management Programs, http://www.asse.org/
practicespecialties/bosc/bosc_article_6.php
Paving the Way for World Class Performance, Alcan’s winning submission for the US National Safety Council (NSC)’s 2006 Robert W. Campbell Award, p. 15; http://www.campbellaward.org/.
11
J&J Safety, Health & Environmental Goes “Beyond Compliance” to Create a Competitive Advantage, Johnson & Johnson’s winning submission for the NSC’s 2005 Robert W. Campbell Award, p. 6; http://www.campbellaward.org/.
12
13
Goldman Sachs Global Investment Research: GS Sustain, p. 8; http://www.unglobalcompact.org/docs/summit2007/gs_esg_embargoed_until030707pdf.
Application of Management Systems to SH&E, DynMcDermott Petroleum Operations Company’s winning submission for the NSC’s 2006 Robert W. Campbell Award, p. 24; http://www.campbellaward.org/.
14
The Noble Way to HSE Excellence, Noble Corporation’s winning submission for the NSC’s 2004 Robert W. Campbell Award, p. iii; http://www.campbellaward.
org/.
15
16
Johnson & Johnson 2004 Sustainability Report. p. 4, http://www.jnj.com/community/environment/publications/2004_environ.pdf.
17 “
18
Where’s My Return? Many Safety Investments Won’t Show Financial Gain,” http://www.asse.org/practicespecialties/bosc/bosc_art_return.php.
World Day for Safety and Health at Work 2005: A Background Paper, ILO, p. 1; http://www.ilo.org/public/english/bureau/inf/download/sh_background.pdf.
An Additional Resource
Creating Healthy Workplaces, IAPA, 2006. A 30-page exploration of legal and economic reasons for creating a healthy workplace;
http://www.iapa.ca/resources/resources_downloads.asp#healthy
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ABOUT IAPA
IAPA (Industrial Accident Prevention Association) is a not-for-profit, member
driven organization operating in Ontario since 1917. Representing approximately
50,000 member firms and more than 1.5 million Ontario workers, IAPA is one of
Canada’s leading workplace health and safety organizations.
IAPA is focused on providing industry-leading training, consulting, educational
products and informational services that meet our members’ needs and the
needs of those in their communities. For more information, visit our website at
www.iapa.ca
Our Vision Is
A world where risks are controlled because everyone believes suffering and loss
are morally, socially and economically unacceptable.
Canada Awards for
Excellence Bronze Award
for Quality Recipient
CIS Collaborating Centre
under the International
Labour Organization
NQI Progressive Excellence
Program (Quality)
Level III Certified
WHO/PAHO
Collaborating Centre for Workplace
Injury and Illness Prevention
IAPA Head Office
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