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Investors interested in health and safety metrics

Human Capital Health and Safety Disclosure Project should be considered

By Peter Sturm

The business case for health and safety disclosure is wrapped around the whole issue of human capital. Human capital incorporates people’s health, knowledge, skills and motivation. These elements support productive work and a productive workplace. These people elements provide real value to an organization, which piques the interest of business leaders, boards of directors and investors. When company value decreases due to costs or losses as a result of workplace injuries, the investor community is very interested in these metrics. Health and safety metrics can effectively demonstrate value creation for an organization. Negative or less than optimal safety metrics can highlight concerns for investors. Investor interest in safety performance metrics will result in heightened interest by a corporation’s board and senior business leaders.

Many are probably asking: what does this mean to me as a safety professional and — more importantly — my role at my company? Our profession has traditionally reported on lagging indicators. For many senior business leaders, these metrics become important when a major injury, crisis or catastrophe occurs. This interest level in safety performance metrics is heightened around the business table, especially to address regulatory, due diligence or investor concerns or issues.

The ongoing discussions and research identifies that safety performance and value generation are “material” to the sustainability discussion and investors need relevant information. Many organizations are following the United States Supreme Court material definition: “Information is material if there is a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the ‘total mix’ of information made available.” Materiality is important as it pertains to health and safety metrics. This occurs when an organization’s safety performance information and metrics may be used by investors and others to understand a company’s financial position and operational performance.

Discussion at a Vancouver event in March, hosted by the Canadian Society of Safety Engineering and the Center for Safety and Health Sustainability, highlighted the need to consider a Human Capital Health and Safety Disclosure Project, mirroring the success of the 2002 Carbon Disclosure Project (CDP). The CDP “aims to make environmental reporting and risk management a business norm, and drive disclosure, insight and action towards a sustainable economy.” Taking this example, you may apply it to the Human Capital Health and Safety Disclosure Project. The safety disclosure project’s aim would be to make health and safety reporting and risk management a business norm, and drive disclosure, insight and action towards a sustainable economy and business.

At the Vancouver event, participants identified five themes to continue further research and discussion:

•Progress on health and safety is slow and hindered by lack of disclosure, standardization, and regulatory requirements.

•Stakeholders need access to accurate, comparable, decision-useful information about human capital performance.

•The business case is driven by a combination of investor interest, ratings firms, peer pressure, and market awareness.

•Health and safety is a critical component of a broader concept of human capital.

•A need exists to explore the potential for a Human Capital Health and Safety Disclosure Project.

The world of health and safety is evolving and the discussion supports what we already know to be true. A healthy and safe workplace is a productive workplace. By capitalizing on people’s health, knowledge, skills and motivation, companies are creating real and sustainable value for business and the economy.

Peter Sturm

Peter Sturm is a senior safety, health and risk management executive with Sturm Consulting. He works with companies to assist them in strategically managing their safety and health risks. This includes integrating their safety and health management systems into their business strategies and sustainability initiatives. He can be reached at peter@sturmconsulting.com or 647.526.7233. For more information, visit www.sturmconsulting.com.
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