Top 5 Reasons Companies Invest In Current Safety Management Practices

The benefits of a strong safety culture are increasingly recognized, leading companies to realize the difference a passive approach makes in comparison to an active one. Companies that passively react when a workplace incident happens tend to face a much larger cost. Additionally, this summer OSHA announced adjusting its civil penalty amounts for inflation starting August 1, 2016. Following the new rule, OSHA’s maximum penalties which had stayed the same since 1990, now increase by 78 percent. Top penalty for serious violations hence increases from $7,000 to $12,471 and maximum penalty for willful or repeated violations increases from $70,000 to $124,709.

Understanding the ROI of safety investment, more companies are actively investing in safety management practices to prevent unfortunate incidents from happening. The 2016 SmartMarket Report asked survey respondents to rank factors that most influenced their companies to adopt the current safety management practices. Its finding shows that factors like “regulatory requirements” and “owner/client demand” are on the decline, while factors linked directly to positive effects of a strong safety culture are on the rise.

Here are the top five reasons companies invest in current safety management practices in the construction industry:

Concern About Worker Health and Safety

At the top of the list is “concern about worker health and safety,” stated by 79 percent of the 2016 SmartMarket Report respondents in 2012, and 84 percent in 2015. This proves to be a critical influence for businesses to invest in safety management practices. Most companies seem to agree that the lives of workers are more valuable than any other resources.

Liability, Insurance Costs and Business Disruptions

Besides concern about worker safety and health is the financial risk businesses face when safety incident occurs. 74 percent of the 2016 SmartMarket Report respondents ranked liability concerns and insurance costs among the top drivers for adoption of current safety investment. There’s no doubt that the financial cost associated with workplace illness and injury is enormous. According to a Stanford University Department of Civil Engineering’s study, companies face significant indirect costs not covered by insurance, exceeding direct costs. Indirect costs can include: “wages paid to the injured employee for absences not covered by Workers’ Compensation,” “wage costs related to time lost through work stoppage associated with the worker’s injury,” “lost productivity,” “cost to clean up, repair and replace equipment and machinery damaged by the accident,” "administrative time spent by supervisors, safety personnel, and clerical workers after an injury,” “third party liability costs,” and “damage to reputation,” to name a few. Additional work required after an incident potentially causes business disruptions, such as a delay in schedule, thus it’s not suspiring that 61 percent survey respondents agreed that “avoiding potential business disruptions” is a top factor driving the current adoption of safety management practices

Industry Leadership in Overall Safety Culture

Interestingly, the influence level of this particular factor varies by the size of the company and type of the company. 78 percent of respondents from bigger companies (100 or more employees) consider industry leadership in overall safety culture influential, compared to only 33 percent of those from smaller companies (50 employees or fewer). 65 percent of general contractors consider this influential compared to 41 percent of specialty contractors. Though there exist conflicting opinions regarding this factor, over half of all respondents (54 percent) agreed that this is a top reason companies invest in safety.