Safety is Good for Profits

 It has long been the view at Safety Concepts that best practice in workplace safety is a driver of a host of behavioural and cultural improvements that in the end all contribute positively to the bottom line.

And now new research supports that view, showing that companies that focus on worker wellness and safety significantly outperform the stock market and yield greater value for investors.

In a report called “The Link Between Workforce Health and Safety and the Health of the Bottom Line: Tracking Market Performance of Companies That Nurture a ‘Culture of Health,’?” published in the September issue of the Journal of Occupational and Environmental Medicine, a team of nine researchers tracked the stock market performance of companies that had won the American College of Occupational and Environmental Medicine’s Corporate Health Achievement Award. The award is given to “organizations with exemplary health, safety and environmental programs,” according to the organization.

Average Increase: 97.26%

The researchers modeled four different scenarios and found that, from 1999 to 2012, the award-winning companies’ stock rose by an average of 97.26 percent. The lowest return in the four scenarios was 75.69 percent and the highest was 140.58 percent.

During the same period, the Standard and Poor’s (an index based on the market capitalizations of 500 large companies) actually lost money, yielding a cumulative return of -0.77 percent.

Some of the companies studied included Boeing, Caterpillar Inc., Daimler AG, Dow Chemical Co., GlaxoSmithKline, IBM, Johnson & Johnson, Lockheed Martin and Union Pacific.

“The logic behind investing in workplace health is straightforward,” wrote the authors, led by Raymond Fabius, a pediatrician affiliated with health care research firm HealthNEXT. “A large proportion of illness is preventable by reducing health risks. Health risks can be improved through workplace health programs. Reductions of health risks can lead to reductions in health costs. Worksite health programs produce a positive return on investment and value on investment.”

Correlation Not Certain

Despite the strong correlation between the companies’ safety and health performance and their market performance, the study’s authors stopped short of making a direct causal connection. According to Fabius and his co-authors, the findings may simply show that companies that are managed well enough to excel in safety and health metrics are also managed well enough to succeed financially.

Nevertheless, wrote the authors, “The evidence seems to be building that healthier workforces provide a competitive advantage in ways that benefit their investors.”

The paper pointed to other research suggesting that illness and disability reduce total work hours by some 8.6 percent, costing the U.S. economy $468 billion in 1996. The paper also cited research finding that illnesses and disabilities cost companies more in lost productivity than they do in medical and pharmaceutical expenses.

Authorities Embrace Philosophy

Worker safety and health advocates, including David Michaels, head of the US Occupational Safety and Health Administration, have long argued that strong safety protections are not only good for workers but also for business performance.

In a January interview with Bloomberg BNA, Michaels said he certainly has seen “many employers recognize that managing for safety is useful not only to prevent injuries and fatalities, but in fact leads to a more profitable company. And I believe that’s being embraced much more widely” (43 OSHR 25, 1/10/13).

As an example, Michaels noted that Paul O’Neill, former chief executive of aluminum producer Alcoa Inc. and former treasury secretary under President George W. Bush, has embraced the philosophy.

“We see that that’s effective, and I think it’s putting to rest the canard that employers save money by exposing workers to hazards,” Michaels said.

An abstract of the report, “The Link Between Workforce Health and Safety and the Health of the Bottom Line: Tracking Market Performance of Companies That Nurture a ‘Culture of Health,’?” is available at http://journals.lww.com/joem/Abstract/2013/09000/The_Link_Between_Workforce_Health_and_Safety_and.1.aspx.