Dollars and Sense: The Business Case for Safety Management Systems
ISO 45001 and the revised ANSI/ASSP Z10 SMS Standard will help safety professionals make the case to executive leadership that integrating safety and health into existing business management systems is both financially prudent and increasingly feasible to achieve.
- By Todd Grover
- Dec 01, 2018
There is a lot of interest in professional circles concerning a systems-based approach to managing the big picture of occupational safety and health, especially since the release of the ISO 45001 Global Health and Safety Management Standard in March 2017. This new standard defines an Occupational Health and Safety Management System (OHSMS) as a set of interrelated or interacting elements of an organization to establish policies, objectives, and processes with the intended outcome of preventing injury and ill health to workers and to provide safe and healthy workplaces. The promise of a brand-new and integrated methodology involving top management, every worker in the organization, and other stakeholders in a well-organized and ongoing effort to identify and control workplace risks is understandably appealing. And while there is a lot to be said for this globally harmonized version of protecting people, as well as the companies they work for, similar concepts have been around for many years.
The British Standards Institution (BSI Group) first published its OHSAS 18000 series in 1999, and the ANSI Z10 Committee was formed in the same year. The International Labour Organization (ILO) released its Guidelines on Safety Management Systems in 2001. Additionally, many insightful employers have created their own successful internal systems based on principles common to all Occupational Health and Safety Management Systems. So while the goals are not necessarily new, the ability to make the case for investing the time, talent, and resources to integrate these methods and important principles into existing ways of operating companies of all sizes and settings certainly has evolved.
What Do the New OHSMSs Bring to the Marketplace?
Implementing a safety management system (SMS) goes beyond simply budgeting for a safety program. An SMS is driven by an ongoing commitment to incremental and continuous improvement through the Plan, Do, Check, Act process. The drivers behind the new ISO 45001 Standard and the upcoming release of the revised ANSI/ASSP Z10 SMS Standard anticipated next year involve helping safety professionals make the case to executive leadership that integrating safety and health into existing business management systems is both financially prudent and increasingly feasible to achieve.
These drivers include:
Optimizing operations: A detailed focus on safety throughout the organization identifies weak points in the dependability of the operations. Making improvements in these critical areas drives worker productivity, which leads to revenue increases in the short term that can turn into long-term, sustainable profitability. An example may be ergonomic improvements that also result in increased output.
Preventing forecastable losses: Identifying where proactive efforts can reduce or eliminate incidents involving worker injuries and damage to equipment and materials results in cost savings above and beyond the price of the corrective actions needing to be taken. An example may be investing in noise abatement technology, given a trend of work-related hearing loss cases despite the use of PPE.
Legal responsibilities: Employers that flirt with just being in compliance with applicable regulations often find that when put to the test, they fall short. Fines, increased insurance costs, and the related expenses of accidents can arise suddenly and affect the bottom line harshly. Proactively running a well-organized health and safety management system goes beyond compliance to designing processes that consistently provide dependable productive outcomes.
Increased job satisfaction: It is smart business to provide safe and accommodating workplaces that attract and retain capable workers at all levels. Laborers realize they do not have to accept hazardous workplace conditions in exchange for a paycheck, and talented management don’t want the extra risks of dealing with preventable accidents, which add to their already demanding list of responsibilities.
Public standing: Companies realize that their public image, positive or negative, has an impact on the quality of the workforce they want to employ, the customers wanting to do business with them, and their perceived role as a good corporate citizen. Today, news travels fast, and first impressions are lasting ones.
Making the Case to Your Stakeholders
Your organization already has a business management system (BMS) in place. It may involve a formal system such as Lean Manufacturing or a quality-oriented approach such as Six Sigma. Or your company may have internally evolved your own BMS for strategic planning and tactical implementation of policies, processes, and procedures that are used to develop, deploy, and execute your business plan. Some of the common areas where systems are implemented are Financial, Administration, Operations, Personnel, Marketing, and Risk Management. Tapping into those existing communication and decision-making channels is imperative to smoothly integrating safety and health management principles into common practice. Integrating these important requirements into your existing business processes uses language other managers can easily understand while avoiding unnecessary duplication of efforts or redundant documentation practices. This unifies your safety and health priorities into day-to-day operational and quality management practices.
Thoughts on Integration
If you are not already doing it, learn to speak the language of business. For example, Return on Investment (ROI) can be a powerful illustrator of the cause-and-effect nature of accident prevention. For example, incorporating an OHSMS into your existing business management system may require a hypothetical commitment of $550,000 to achieve. Projecting out what can be saved in the short term related to lost productivity due to disruption of operations from a history of significant accidents, increased insurance expenses, public relations impacts, and the positive benefit of increased efficiencies due to improved safe work processes may return an estimated additional profit of $1,300,000 within a three-year period. Running the ROI math:
Gross Profit ($1.3M) less Cost of Investment ($550K) equals a Net Profit of $750,000
Net Profit ($750K) divided by Cost of Investment ($550K) = 1.36 x 100% = 136% Return on Investment
Annualized (136% / 3years) at 45% ROI per year
Other suggestions include appealing to management’s sense of the need to control risk. Puts and takes are a normal part of financial analysis, but it is uncommon for a fiscal plan to include the preemptive resources to absorb a major cost event related to preventable and forecastable accident(s). Other organizational issues or needs may be identified, and by applying OHSMS perspectives while working with other managers, the value of your approach should be evident. Look for opportunities to engage with non-safety, health, and environmental stakeholders in setting strategic direction and goals so that they can appreciate the value of integration you have to offer. This can remove the contentious relationship of productivity vs. safety and can reframe the effort to prove that everyone wins when the job is done according to plan.
How Can the New OHSMS Standards Help?
Both the ISO 45001 Global Health and Safety Standard and the ANSI/ASSP/ISO 45001-2018 version of this standard (adopted as a U.S. National Standard in April 2018) are set up with user-friendly formats that make it easily blended into existing program such as ISO 9001 - Quality Management, or ISO 14001 - Environmental Management. Annex A (of both standards) is dedicated to the provision of advisory information and guidance on the use and implementation of the ISO 45001 Standard.
The upcoming release of a significantly updated ANSI Z10 SMS Standard next year will also see the same improved, single-column formatting applied to smoothly integrate other ISO standards. Additionally, the new ANSI Z10 is expected to be issued with an in-depth Implementation Guide that covers the fundamentals of how to include OHSMS elements into existing business management systems. Sections of this guide provide insight as to what an effective OHSMS looks like in practice and how to enhance workers' ability to contribute solutions to the incident prevention challenges. Information on cooperatively setting goals and objectives with other staff members and a very proactive approach to hazard identification and occupational health considerations are important elements being considered for inclusion in the implementation guidance. Another helpful section under development addresses methods of measuring the successful implementation of the safety management system against established metrics. All of which should prove to be very illustrative in making the SMS business case at the executive level.
This article originally appeared in the December 2018 issue of Occupational Health & Safety.