Safety As Sustainability

Once upon a time, sustainability was a non-issue in business because it seemed pretty simple: keep getting sales orders, deliver in a way the customer stays happy and everything else takes care of itself. As business ramped up into our current hyper-competitive environment, supply chain managers began to carefully scrutinize what their partners were doing to ensure that their operations would be sustained and they would be around in the future.

Part of this scrutiny dealt with “sustainability” related to environmental management, the practice of making responsible business moves that do not place the short-term financial interests of the company before the long-term needs of the ecological environment. Business decisions are scrutinized to make sure they consider the physical, chemical, and biotic factors acting upon the ecological community.

Now sustainability is increasingly being viewed through a much wider lens that scrutinizes the business footprint being left on the environment, the community and, to some extent, global politics. Until recently, for example, few small and midsized manufacturers worried about using so-called “conflict minerals” that originate from regions of the world being torn apart by military conflicts that are, in turn, often funded by the consumption of these same minerals. Yet today, many companies are now required by law to prove that they aren’t buying conflict minerals.

What does this wider view of sustainability have to do with worker safety? Safety – or more accurately, the lack of safety – can play a profound role in the level to which a company is considered sustainable.

COMMUNITY IMAGE IS EVERYTHING
The first, and perhaps most obvious, role that safety plays in sustainability is its impact on the local community. A fatality or serious injury at a local job shop or steel mill can be big news to those who live and work nearby. How the incident is perceived can have a lasting impact on the reputation of that business.

At first glance, this might not appear to be big a deal. But a shop or mill with a reputation of being unsafe may struggle to find local labor and be forced to settle for less desirable job candidates. And it may not be an actual injury, but the perception of injury that triggers damage to a shop or mill’s reputation. When people discover that I am a safety strategy consultant, one of the first things I usually hear is “boy, our shop sure needs you.” Do you really think these people are trying to get their family, friends, and neighbors a job along side them?  Or are they more likely looking for work elsewhere?

Though most people will fish dead opossums out of swimming pool for the right money, operating an environment where employees feel unsafe forces a shop or mill to pay substantially more or hire less competent workers with fewer skills. In either case, that business is less sustainable because it is failing to improve its safety. Potential customers may question the process capability of a shop or mill that hurts its workers and decide that doing business with them may attract too much unwanted negative attention, so they assign a multiplier to job bids and make it more difficult for them to hit their sales numbers.

DOUBLE BARREL HITS
I’ve killed a digital forest writing about the true costs of injuries and how they affect direct costs, eat up profits and drain the financial bottom line. But the biggest threat injuries pose to business sustainability is in indirect costs, such as the impact of encumbered cash on a shop or mill that lives and dies by cash flow.

Injuries force a shop or mill to either pay more in premiums or, if they are self-insured, put away money in escrow to ensure that they have enough to pay claims. In the U.S. this number is calculated by safety performance over the last three years. If the shop pays injured workers in sufficient numbers (or incurs a large cost to treat their injuries and pay them to stay home), that business has a significant, if not crippling, amount of cash encumbered. The more money spent on injuries, the more cash encumbered.

The bottom line is that the shop or mill essentially takes a double barrel hit, both paying out worker injury claims and having to increase the amount of encumbered cash.

A PERFECT STORM IS COMING
Experts are predicting a “perfect storm” of global resources shortages in 2030 when the world’s population is expected to exceed 8 billion. [1] Companies that don’t plan for shortages of key resources may find themselves out of business, outmaneuvered and replaced by those that make a concerted effort to ensure their sustainability.

As one resource becomes scarcer and the price of it rises, innovation and alternative resources become more profitable and viable. The late science fiction writer Michael Crichton predicted a global information crisis in his 1980 book, Congo. His premise was that the need for information and the speeds at which it would be demanded would rapidly exceed the physical capacity of telephone lines and plunge the global economy into an “information shortage.” His characters travel into the jungles of the Congo in search or King Solomon’s mines for a good source of white diamonds – a resource that was valueless as a gemstone or for industrial uses, but necessary for an emerging technology.

Much of what he predicted did, in fact, come to fruition – the speed and volume of information transmitted globally far outstrips the ability for analog phone lines to keep up, but the advent of innovations in fiber optics averted the crisis. In the same way, the supply chain will continue to grow shorter as global competition squeezes margins, but companies that invest in sustainability efforts – above all, worker safety – will have more dollars in the war chest, operate at a higher level of efficiency and productivity, and be better positioned to survive.

TAKE THE BROAD VIEW
It’s time to take the broader view of business sustainability. Explore ways to reduce your carbon footprint, use resources more efficiently and to use less resources overall. But most important, stop wasting precious time, money, and resources on processes that can hurt workers.

[1] Source: http://www.cnbc.com/id/101051828#.