Injuries cost business 6% of their profit

At The Safety Conference in Sydney in October 2009, Dr Ian Woods, a senior research analyst for AMP Capital Investors, will advise Australian employers that the cost of workplace injuries on their businesses could be around 6% of their profit.

According to a media release in support of the conference

Dr Woods signals three occupational health and safety costs of concern to investors: workers’ compensation premiums, indirect costs, and the costs of alleviating workplace incidents.

“The indirect and unbillable costs associated with workplace injuries are like an iceberg,” he says.  “They represent a huge percentage of the total cost that’s impossible to assess until you run into trouble.”

“The disruption to production caused by workplace injuries cost Australian businesses an estimated $490 million in 2000-01.  The extra administration cost another $360 million.  Incidents can also trigger loss of goodwill, strikes, recruitment issues and dozens of other immeasurable costs.  The United Kingdom’s Health and Safety Executive indicated that the cost of uninsured losses is 10 times the business cost of insurance premiums paid for the same period.

“An injury with $1,000 in direct claims costs will also bring about $5,000 of indirect costs.  Assuming a 5% profit margin, that equates to $100,000 of turnover.  This simple return on investment (ROI) illustrates how valuable preventive measures are to financial bottom lines.

“Still, there is more to investing than just the economic case for improving OH&S performance.  As well as the economic costs, inequality of benefits, costs and suffering are key issues.”

Some of the concepts sound familiar.  Around the turn of the century there was increasing interest in corporate social responsibility and ethical investments and OHS was mentioned regularly as a corporate element that investors would seriously consider.

A good example of the feeling at the time can be seen in a 2002 interview for SafetyAtWork magazine, Paul Gilding of ECOS Corporation* talked about workplace safety.  He was asked about linking workplace safety with sustainable business.

Pages from Safe Companies Ecos Corporation March 2002 coverPG: This is a real fascination for us.  We first came across workplace safety as a major issue for one of our clients, DuPont, where safety culture is so embedded in their business that you can’t walk into their offices without picking it up.  We realised that, as sustainability experts, we had hardly ever come across that issue.  The people who talk about sustainability also talk about corporate social responsibility, human rights in developing countries, climate change, biotechnology, ethics, every issue you could think of but they very rarely, except in a token way, talk about workplace safety.

We first thought why should this be a sustainability issue and then we thought why wouldn’t it be?  We’re talking about the way corporations behave, the effect they have on society, the effect they have on the community they work in, yet we’re not talking about the fact that they are killing and hurting their own people.  This is a surprising omission when it is so fundamental to sustainability.

This perspective has transformed into the widespread advocacy of “safety culture”.

2i14-3 horstAround 2001 Westpac Banking Corporation was developing an OHS index that measured the share performance of the top 100 companies.  Interest in this has faded over the last ten years to such an extent that it is difficult to locate any reference to it.  However, the Westpac index was discussed at many OHS conferences at that time and gained overseas attention as shown in these comments by the former Director of EU-OSHA, Hans-Horst Konkolewsky to Safety At Work magazine in 2001. [Full interview is available]

Q: One of Australia’s major banks, Westpac, is establishing an OHS index that shows relations between this index, the All Ordinaries share index and a company’s share performance. Have you seen this sort of thing in the European region?

HHK: We haven’t seen it explicitly. This bank has taken the lead. I saw on my way to Australia that there seems to be an F4 investment initiative to assess companies’ performance but more broadly with environmental performance, social performance, child labour issues, but also safety and health.

This is one of the many ways we can improve awareness and create a preventive culture starting through the investment area. In Europe, we have had quite a number of different approaches where companies have issued social statements or accounts where they have informed about their employees’ satisfaction with their work, working conditions, customer satisfaction with servicing, their relationship to the society, activities related to employment problems and so on. There are a number of examples that point in the same direction.

I must say that I believe that this can be a rather strong movement if investors and customers, through their demands and market mechanisms, can improve safety and health.

A capital-idea coverA more detailed report that places OHS strongly within the CSR discipline is a 2002 report, now available through an Australian Government website, called “A capital idea -Realising value from environmental and social performance“.

Dr Wood’s presentation will build on these reports and the work of overseas OHS organisations in trying to provide a cost estimate for workplace injuries.  Let’s hope that there are specifics and that there is enough audience enthusiasm to generate a sustainable interest.

Kevin Jones

* cannot verify that this report is still available online

HR management needs to engage with safety management

Businesses, more often than not, place OHS as a subset of the Human Resources Department.  This gives the HR manager considerable organisational clout but often keeps the importance of OHS constrained.

This structure may be functional but also reinforces that the belief that safety can be addressed in HR terms and that is not necessarily the case.

HR Leader cover 001The limitations can be illustrated through the cover story of the latest edition of Human Resources Leader, a weekly publication from LexisNexis.  “People profit…and how to measure it” * is a very good article for the magazine’s intended readership of HR practitioners and recruiters.  It discusses the need for more research into the links between corporate financial performance and employment engagement, “soft measures” and other “metrics” and several other personnel management concepts.  It even provides a “formula for measuring Employee Lifetime Value (ELTV)”.

One serious safety incident could blow all these metrics out of the water.  The risk of injury or illness doesn’t seem to be calculated anywhere in the article.  The costs associated with not managing safety seem to be well-established and tangible through medical costs + repair costs + rehabilitation costs + business disruption + workers compensation.   Dr Ian Woods of AMP Capital Investors estimates injury costs equal an average 6% of profit.

If safety is an element of human resources management, there should be at least some (passing) mention of it, or its costs, in articles that try to measure people management costs.  Omitting this business cost, or wellbeing threat, or continuity threat, or whatever phrase is fashionable at the time, does both safety management and personnel management a great disservice.

Safety is far more than just “health & wellbeing” – a truism that some in the HR sector, particularly the white-collar professions, tend to forget.

Kevin Jones

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SafetyAtWorkBlog gets praise for independence

Today, the Australian Chamber of Commerce and Industry (ACCI) released a four-page document criticising the campaigning techniques and statistical foundation of the Australian Council of Trade Unions (ACTU).  Nothing unique in that ideological battle, however, what grabbed our attention was that SafetyAtWorkBlog is mentioned specifically.

ACCIBriefing_8Sep2009 coverI contacted the ACCI this morning and thanked them for reading the blog and for describing SafetyAtWorkBlog as a “respected website”.  We’ll accept praise from anyone as our major indicator of success mainly comes from the steady increase in our readership statistics.

The ACCI makes considerable mileage out of a SafetyAtWorkBlog article that discusses the survey results that the ACTU released in support of some of its campaigning for further changes in the national OHS laws that are currently being drafted.

Several comments are useful in relation to the ACCI paper

SafetyAtWorkBlog obtained the survey results by requesting them through the ACTU and being provided them by Essential Media.  We have a policy on any media releases that quote statistics.  If the statistics are not readily available, or at least the relevant OHS parts of survey results, we do not usually report on the issues raised or we make a point of stating that the statistical assertions are not able to be verified.

The ACCI paper echoes many of the points raised in the blog article.  Our main point was to question the wisdom of using statistics as support for a campaign when the statistics do not, necessarily, support the  campaign objectives, or, in the least, may provide alternative interpretations.

The Essential Media report provided to SafetyAtWorkBlog could have been more detailed and the ACCI certainly wants more than we have seen.  Releasing such a paper criticising the ACTU for not sharing research data puts the ACCI in a position now where it cannot deny the public release of its research data, at least, on matters relevant to OHS.  The questions from ACCI have set a precedent for openness and information sharing.

Whether marching in the streets in support of an OHS campaign is effective, or warranted, or not is almost a moot point.  Many of the televisions stations covered the union marches in Australia earlier this week.  The 7.30 Report felt there was enough of a profile raised by the union campaign that it followed up many of the concerns raised with a long article in its show on 8 September 2009.  The media exposure has been able to further raise the profile of OHS as a contentious issue that is being acted upon by government.  It should raise the “seven out of ten” OHS awareness factor, quoted by the ACCI, a few points at least.

Given the criticism of the ACTU, one could genuinely ask, how the ACCI is increasing awareness of OHS matters in the community as well as its membership?  It is not expected out in the streets but the occasional media release or four-page rebuttal does not have the same affect as a march of hundreds of people on the television.

In all of this to-ing and fro-ing, SafetyAtWorkBlog takes pride in its independence and as a forum for expressing views on a social and industrial issue that has only ever before been discussed by political ideologues from fixed perspectives.

Perhaps safety professionals could apply the wisdom of Oscar Wilde to safety

“The only thing worse than being talked about is not being talked about.”

It seems to me that OHS has not been talked about for far too long.

Kevin Jones

Safety industry jargon

Every industry has jargon.  A common language and common terms can build companionship and solidarity.  But when used outside a “discipline” it reduces the effectiveness of communication.  The mis-application of jargon can generate confusion and is, in many areas, being purposely used to hide meanings.  Sadly in the safety profession, jargon is used to mask the inadequacies of professionals in many circumstances.

Below is an example of the (lack of) communication that recently did the rounds in Australia:

“…. partnership to assist in facilitating a more holistic approach to our (OHS) profession along the lines of more clear, established and disciplined paths and requirements to progress those paths.”

I would suggest this would translate as “someone has given us money so that we can do things”.

A very good blog article on current “business-speak” is available online.

Please send in your examples of safety-related nonsense that you may have found in mission statements, annual reports or other documents.

Kevin Jones

Lawyers identify contentious OHS law elements

The Safety Conference scheduled for Sydney at the end of October 2009 has finally got an OHS issue that is contentious and is also a work in progress.  The unions are starting to make noise on the OHS laws.  The employer groups are manoeuvring cautiously.  The safety professionals are largely silent (again) but the lawyers – the group with perhaps the most to gain from the new harmonised OHS laws – are set to analyse and debate.

A media statement from the conference promoters was distributed on September 8 2009 and, very differently from most media releases, is informative without being pushy.  Below is the body of that statement:

Three issues are set to dominate discussion: the burden of proof, the personal liability of company officers, and the impact on prosecutions. Neil Foster, senior law lecturer from the University of Newcastle, believes personal liability is at the heart of the changes.

“The harmonisation process seems to have been driven by directors’ fears of personal liability and the hope that there would be some watering down of the laws,” he says.  “In my view, the Model Act inappropriately waters down the personal responsibility of company officers, although I do support some of the proposed changes in this area, including the acknowledgement that the officer has obligations to exercise due diligence to protect the workers. But with the change to the current onus of proof provisions, it is quite possible that guilty people will now escape justice.”

Michael Tooma of Deacons law firm, who will moderate The Safety Conference’s harmonisation panel discussion, says that while current state laws differ in their approach to the approach to personal liability of officers, all will be reshaped by the proposed Model Act.

“Despite the range of liabilities, all have one thing in common: the officer will be personally liable only if their company commits an offence,” Mr Tooma says. “The new regime does not require this.”

“Under the approved recommendations for the new OHS laws, officers will be liable if they fail to exercise due diligence. That is, the duty has been recast as a positive obligation on officers to proactively ensure compliance with OHS laws rather than an attributed liability in the event of a breach by the company. This is a landmark shift in approach which will have a significant impact on OHS enforcement and compliance.”

The definition of “due diligence” may also be contentious.

“The Workplace Relations Ministers’ Council (WRMC) did not approve the recommendation for a definition of due diligence,” Mr Tooma says. “The Committee had recommended that due diligence be defined in line with existing case law on its meaning, drawn largely from NSW where the term has been in use for almost 30 years.”

“Instead, WRMC preferred to rely on the Courts to interpret due diligence. Practically, that means that the true harmonisation of the scope of the personal liability of officers may have some way to go as each State Court and Territory Court attempts to interpret due diligence in the context of the case before it until a case is brought to the High Court so that an authoritative determination of that term is made which is binding on all state and territory Courts.”

Michael Selinger of Holding Redlich Lawyers points out that company officers found guilty will face increased penalties, rising from the from the current maximum in NSW of two years in prison or fines of $55,000 to fines of up to $600,000 for an individual and five years in prison.

New South Wales employers, however, may enjoy some relief as the burden of proof shifts to prosecutors.

“The new Model Act will have a more significant impact on New South Wales employers than those in any other states because the Model Act is largely based on the Victorian and Queensland Acts,” says Mr Selinger.

“For New South Wales, the onus of proof will move away from the employer as a result of the inclusion of the qualifier of ‘reasonably practicable’ in the general duty to ensure safety under the Act. When it comes to proving liability, the prosecutor will now need to show the employer has not taken all reasonable steps to prevent injury.

“In 95 per cent of cases, shifting the burden of proof to the prosecutor won’t affect the outcome. This is because when an injury occurs, employers examine the workplace to see what actions need to be taken to prevent a recurrence – by doing that, they show that there were reasonable steps that could have been taken, which makes it easier for the prosecution to prove liability. To some extent, there’s always been this tension between trying to improve the safety system and protecting your legal position.”

“The legislation in NSW has historically been enforced more vigorously than in other jurisdictions but most OH&S regulators only initiate a prosecution if it is in the public interest and they have a good prospect of success. Under the new Act, there’s likely to be more of an emphasis on education and cooperation between the regulator and business. We won’t really know the answer to whether there’s likely to be fewer prosecutions until the new Act is implemented – at the end of the day, how it is enforced will be the key factor. The regulator will still have plenty of enforcement tools and there is likely to be a uniform enforcement policy applied across the country.”

On the other hand, Neil Foster believes the onus of proof belongs with employers.

“The Model Act has been legitimately described as ‘a race to the bottom’,” Mr Foster says. “The onus of proof should be placed on employers because they have the greatest control over safety: how hard people work; safety procedures; how money is spent; and safety policies. There is still a lot of carelessness in workplaces and WorkCover sensibly doesn’t launch prosecutions unless there’s a good chance the employer is guilty and hasn’t taken reasonable precautions. I think the NSW safety system has been working well.”

Scarlet Reid, special counsel for Henry Davis York says the impact of reversing the onus of proof is uncertain.

“From a practical perspective, this could make convictions more difficult to obtain in New South Wales,” she says.  “In the absence of any changes that stipulate which courts hear prosecutions at first instance, it remains to be seen if this is in fact the case. It is questionable as to whether real uniformity can be achieved without examining this important issue.”

Ms Reid says employers were likely to benefit from other changes under the proposed Model Act.

“Defendants in NSW and Queensland should benefit from the proposed expanded appeal rights,” she says. “Defendants in NSW may also find comfort in the proposal to abolish the prosecutor’s right to appeal against an acquittal.”

If employers are winners under the changes, unions, who will lose the right to launch prosecutions, protest vigorously against the proposed Model Act, claiming it would be detrimental to safety. Neil Foster agrees.

“The changes to be brought in under the harmonisation process send a message from government to employers: safety’s been too tough and that we’re not so worried about it anymore. It’s very sad.”

Kevin Jones

Business drops opposition to Australia’s new OHS laws

A story on the front cover the Australian Financial Review on 8 September 2009 lists the “wins” of the union movement in its negotiations on new national OHS law.  But it is the last couple 0f paragraphs on page 8 that are most surprising.  The article says

“The coalition dropped its previous opposition to the SafeWork Australia bill, allowing it to pass in its original form, limiting the number of unions and employer representatives on the body to two each and giving Ms Gillard [the Workplace Relations Minister] a veto on the appointment of these representatives.”

This seems to be a considerable backtrack on the strong opposition and media statements coming from employer groups over the last 12 months.  One wonders what trade-off the industry associations have managed to obtain.

The changes reported are not very radical for those familiar with the Victorian OHS laws – leave for OHS training and greater protections for union members.  But the union movement has (yet) to get a reverse onus of proof or rights to prosecute.

The media release from the IR Minister crows about the Conservatives’ backdown and says little else other than marking the passing of the legislation.  Ultimately the biggest benefit of this legislation is clarifying the status of Safe Work Australia.

UPDATE: ACCI media statement

The Australian Chamber of Commerce & Industry has released a conciliatory media statement making no reference to its previously strident opposition.  The only semi-interesting content (other than the fact of the statement itself) is its reiteration of OHS being a shared responsibility and the need for Safe Work Australia to ensure its independence.

“The message that working safely requires everyone to take their responsibilities seriously now has a better chance of becoming a co-ordinated national message, with parallels to the mutual responsibility message that features in road safety awareness and safe driving campaigns.”

Kevin Jones