The Cost Of Inaction – Can You Afford Not To Invest In HSEQ?

This article is the last one in a series of three blog posts covering HSEQ. In my first article, I introduced five steps needed to create a sustainable supply chain, while in my second post, I highlighted how your response could get in the way of safety performance. Can you afford not to invest in HSEQ? You will fail if you don’t follow these five steps and improve your response to safety because you will sooner or later end up paying the cost of your inaction. 

And I have to say, the scope of the total cost is jaw-dropping. 


Let me explain this by reviewing the impact of inaction on people, the environment, assets, and reputation (PEAR).    

People  

Job-related injuries are expensive due to medical expenses, lost workdays, and insurance costs. The first step in protecting your business and workforce is knowing how serious injuries happen. 

The Liberty Mutual Workplace Safety Index 2021 compiles the ten causes of the gravest disabling workplace injuries in the USA – those that caused employees to miss work for more than five days – and ranks them by direct cost to employers based on medical and lost-wage expenses. Direct costs of all disabling work-related injuries equal US$58.61 billion, with the top 10 causes comprising 89.2 percent and the top five 68.9 percent of the total cost burden. 

  1. US$13.30 (22.7%): Overexertion involving outside sources (handling object) 
  2. US$10.58 (18.1%): Falls on same level 
  3. US$6.26 (10.7%): Falls to lower level 
  4. US$5.61 (9.6%): Struck by object or equipment (being hit by objects) 
  5. US$4.71 (8.0%): Other exertions or bodily reactions (awkward postures) 
  6. US$3.16 (5.4%): Roadway incidents involving motorized land vehicle (vehicle crashes) 
  7. US$2.52 (4.3%): Slip or trip without fall 
  8. US$2.46 (4.2%): Struck against object or equipment (colliding with objects) 
  9. US$2.01 (3.4%): Caught in or compressed by equipment or objects (running equipment or machines) 
  10. US$1.66 (2.8%): Repetitive motions involving microtasks 

Example – An operator at a chemical site falls to a lower level from the top of a tank truck during loading.  He did not wear a safety harness, and as a result, suffers a significant injury. 

Cost – The operator suffers serious injury requiring one month off duty. If we assume that the average market price per hour for an individual working a 7.5-hour working day is US$30, the total cost to the business will be US$4,500. Companies must also cover a range of other related expenses, including compensation for replacement workers, additional training, and insurance claims, for example. There can also be a surcharge on insurance fees, non-compliance fees, and civil or criminal penalties. Taking an injured worker off the job following an accident often also means losing some critical expertise. But it could easily exceed this.

Environment  

The environment is a hot topic, so environmental issues always have a huge impact. There is the cost of containment, cleanup, and damages resulting from a release.   

Example – A truck driver delivering a tank container with hazardous goods is speeding and causes an accident on a bridge. The tank container starts leaking into the waterway and contaminates the local drinking water supply. Someone on the scene calls the safety manager of the shipper, but the safety manager panics and slows down the emergency response and containment. It was the first time the shipper used that transportation company. 

Cost – Businesses must consider charges for repairing damage to drainage infrastructure or the local environment, as well as litigation and legal fees. The cost of cleanup depends heavily on what product is spilled and where it occurs. The cost of cleaning up a tank container that spilled several tons of hazardous goods into a waterway could easily reach over US$100,000. More hazardous substances can invoke cleanups and lawsuits, costing millions of dollars. Loss of product and delivery delays should also be considered. 

Assets  

Imagine cleaning, rebuilding, and replacing damaged equipment and infrastructure. 

Example – A leakage at a tank terminal is handled with no site-specific guidance during cleanup by a local emergency response provider. As a result, hazardous materials seep into the ground and contaminate 30 tons of soil. Investigation shows that the valves were malfunctioning and not inspected periodically.   

Cost – Excavation and incineration of contaminated soil can cost US$1,500 per ton, leading to total costs of US$45,000 to clean up the 30 tons. During the cleanup, business operations may also temporarily cease, which will also have a financial impact. 

Reputation  

Loss of reputation plays a significant role in the total cost. While difficult to quantify, it can have an enormous impact on long-term business continuity. 

Example – Due to an explosion at a production site, potential new hires are shying away from accepting positions at your company. The media is also on top of a sensational story, and consumers that hear the news decide to avoid the company’s products and services. The company’s crisis response is slow, and communication with stakeholders is poor. The explosion was the result of human error. 

Cost – The associated overall costs are not easy to measure, but the impact on reputation may hit the company’s bottom line very hard. It may damage client relationships and affect internal morale.  Poor crisis handling and communication will only worsen the situation. 

Invest in HSEQ to boost your bottom line 

The business case for boosting safety performance is clear. With a robust safety program, it will be possible to prevent most incidents. However, no matter what systems are in place, unexpected occurrences can still happen.

What will you do differently? 

Does my article help you re-frame your HSEQ priorities? Can you see how not focusing on safety excellence is very costly? How will you invest in HSEQ?

Let me know if this message resonates with you. And if so, I ask you to grab a pen and paper and spend 5 minutes writing down what you think you can do differently to invest in HSEQ during the next 12 months.   


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