The Hidden Costs of Poor EHS Management | Resolution Digital

The Hidden Costs of Poor EHS Management

Maintaining safe operations is not a burden, but a business advantage.

Effective health and safety management is vital to ensure the wellbeing of employees and stakeholders. For example, if a failure to implement adequate EHS management occurs in a business, this could lead to accidents, injuries, and even fatalities in the workplace. In turn, businesses that fail to deliver their of duty of care can have a detrimental effect on workers’ and their families’ physical and mental wellbeing. 

It is without a doubt that the human factors of poor health and safety management have been discussed at length in the health and safety industry. However, have you ever considered the impact that poor health and safety management can have on the bottom line?

According to the HSE, the estimated cost of injuries and ill health in 2019/20 was £18.8 billion. 

This statistic may shock a lot of people, but it’s important to consider the numerous hidden costs of ineffective health and safety management. Medical expenses and wages paid to employees who are unable to work as a result of ineffective health and safety measures in businesses are direct costs. Injury-related productivity loss, lost work quality and quantity, and the cost of preventing future injuries are all examples of indirect costs.

In this article, our expert team examines the financial consequences of poor health and safety management and provides tips for improving your practice, outlining both direct and indirect costs of poor EHS management.

Direct costs

To consider the direct costs of ineffective health and safety management in business, it is important to examine measurable costs that can be accrued following an incident in the workplace. Here are a few to consider:

  • Legal fees. Legal action may be taken against a company if health and safety violations are discovered. Regardless of whether the case is settled out of court or goes to trial, this can result in high legal fees.
  • Compensation claims. An employee may be entitled to compensation if they suffer an illness or injury as a result of their job. Businesses may be required to cover medical costs, lost wages, and other costs as a result, which can be costly.
  • Higher insurance premiums. Insurance companies may view businesses with poor safety and health record as a higher risk, which may result in higher premiums.
  • Fines. A company could be fined if it is found to have broken health and safety laws. These may be significant, depending on the nature of the offense and the laws in the relevant jurisdiction.
  • Employment cover. Insufficient health and safety management can lead to employee illness, injury and/or stress leave. Consequently, this can lead to a range of costs for businesses including sick pay, sick leave and employment cover.

Indirect costs

After direct costs, indirect costs are frequently overlooked because, in the short term, ignoring them can benefit an organisation by increasing profits. However, the organisation may suffer in the long run if indirect costs are ignored due to production costs that cannot be avoided. Because resources are allocated to a project with a lower ROI than one with a higher ROI, this results in opportunity costs.

Some indirect costs of poor EHS management include:

  • Lost productivity. Absences from work as a result of accidents and injuries can have a negative impact on productivity. Additionally, employees may be less motivated and productive if they are concerned about their health and safety at work, which can also have an effect on a business’s bottom line.
  • Damage to reputation. A company’s reputation can be damaged by poor health and safety management, which can result in fewer customers and lower sales.
  • Loss of contracts. A company may have a harder time retaining or winning new contracts if it has a bad reputation for health and safety. Revenue may decrease as a result.
  • Decreased shareholder value. Investors may find a company with a poor safety and health record less appealing, which may result in a decrease in shareholder value.
  • Delays of projects and schedules. Workers spending time off work due to stress, illness and injuries can lead to an insufficient workforce and delay in projects. This can create delays in projects, reducing the efficiency of work and therefore reducing the overall profit.
  • Cost of remediation. It may be necessary for a business to make costly adjustments in order to comply if it has failed to meet its health and safety responsibilities. This might include things like training, safety equipment, and other costs.

How can your business mitigate direct and hidden costs?

With both the direct and hidden costs of poor EHS management in mind, how can businesses mitigate such costs and protect their bottom-line? It goes without saying that investing in your health and safety strategy is a proactive and essential step in business. 

Many of our clients come to Resolution Digital to ask how they can improve their health and safety procedures. Implementing effective training and procedures, conducting regular safety inspections, and ensuring that all equipment is well-maintained are all steps you can look at improving. Some key points include:

  • Promote communication across all levels
  • Induct and train staff correctly and efficiently
  • Establish a solid reporting process
  • Review and reflect frequently

Investing in an online health and safety system will save you money and time by reducing costs caused by poor health and safety management, providing real-time visibility onto the status of your workforce, plus on-demand access so you can make better decisions as a business leader. There is also a multitude of benefits of utilising modern technology to enhance your EHS strategy, such as the ability to easily review and update content, ensure that all employees are equipped with the necessary health and safety knowledge, and curate an all-inclusive learning environment to ensure that everyone is up-to-date with everything they need to know in terms of health and safety. 

Want to learn more?

Our expert team are always happy to discuss ideas and work in partnership with you to understand your health and safety needs and identify the best solution to help you reduce costs and most importantly, take effective steps towards ensuring that every worker gets home safe at the end of the day. 

Explore options to curate a bespoke online health and safety platform today.

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