Are WHS And Productivity Linked?

Health and safety in the workplace has often been associated with parallel improvements in productivity. Less often have the improvements been supported by scientific study. However, the Occupational Safety and Health Administration arm of the United States Department of Labor¹ recently put forward a business case for safety where they noted that: “Employers that implement effective safety and health management systems may expect to significantly reduce injuries and illnesses and reduce the costs associated with these injuries and illnesses, including workers’ compensation payments, medical expenses and lost productivity. In addition, employers often find that process and other changes made to improve workplace safety and health may result in significant improvements to their organization’s productivity and profitability.”  It could be said that this focus also leads to a happier workforce in general.    

Is WHS An Indicator Of Performance?

The business case from the United States Department of Labor references an Australian study by Goldman Sax and JB Were titled Good Workplace Health & Safety = Good Investment Returns.²  The report identifies that a strong workplace health and safety focus equates to good returns in terms of the organisation’s share price. Therefore, they conclude that investors can monitor WHS and use it as part of their investment decision making.

The researchers report that WHS ratings have great potential for identifying underperforming stocks with 70% of stocks identified as WHS and Environmental, Social, and Corporate Governance (ESG) underperformers also underperforming financially.  No wonder WHS ratings and other ESG data are now included in the Goldman Sax and JB Were “Conehead” portfolio analysis system.  

The fact that top financial organisations are looking at ESG and WHS has to be a good thing for us mortals working on the ground to improve W/OHS.  That correlation may be OK for investment decision making but we really want to see evidence of causation.  Happily, the research team also looked for causation i.e. was WHS performance just associated with, or driving, the performance improvement. The researchers found “strong logic” of a positive relationship between ESG, WHS and stock price performance with the relationship described as a mix of association and causation.  Their reasoning:

"WHS is likely a key indicator as to how well a company is managing it's human capital. Broad human capital management issues will be explored further in forthcoming research.

With regard to association, WHS is likely be a proxy for general good management and governance, with logic and other research suggesting that these are linked to company performance."

COVID Booster Shot For WHS

The COVID pandemic has led to much greater focus and awareness of OHS/WHS from boards down through organisations. Joanne Farrell, Chair of Safe Work Australia, has been quoted as saying, “Ideally we want to see businesses reach beyond compliance and explore innovative ways of working, consulting with workers and their health and safety representatives, and asking what else can be done to protect them.’³

This quote comes from an article in the Australian Institute of Company Director’s October 2022 magazine which discussed the challenges that boards and organisations face in managing workplace health and safety with the added complication of COVID. Ms Farrell went on to say that “COVID-19 has encouraged directors to keep on top of WHS risks in a more hands-on way, including the legislative requirement to consult with workers. This includes providing rigorous oversight and engaging with management and workers in making decisions about safety and in the safe design of work practices. For example, asking them what makes them feel unsafe and asking what they think the best solution is.”

The Value of a Safe Workplace

At the same time, Corporate Social Responsibility (CSR) and Environment, Social and Corporate Governance (ESG) are increasingly becoming areas of focus for many organisations. They both emphasize the importance of creating a safe work environment and the value this brings to a company’s reputation and profitability. Research has shown that organisations that invest in occupational safety perform better, reduce turnover, and help workers do their jobs more effectively.⁴

Return on Investment

It makes sense to look at the money you spend on health and safety as an investment in your business rather than a cost that has to be incurred. Your ROI comes from the following:

Enhanced Reputation: Customers will view you as safety minded, health conscious and sustainable 

Compliance: Non-compliance with regulations, standards and laws can be costly both financially and in public perception

Cost savings:  Your OHS/WHS program can reduce costly worker injuries and incidents and related expenses of medical care, paid time off, litigation and disaster mitigation 

Operational Efficiency: A focus on safety leads to higher employee productivity and revenue growth whilst supporting long-term sustainability 

Employee Satisfaction: It is easier to recruit and retain good people when you provide a safe workplace, care for employee well-being and protect the environment

Focusing on safety should be one of your business’ core values. It makes good business sense with a sound return on investment. It’s also the right thing to do from a moral and ethical point of view.