Good Labour Practice - Preventing Fatalities and Serious Accidents
Economic growth through employment creation and income generation should be balanced with protecting workers’ basic rights and the guarantee of decent work. Workers’ rights encompass the employment standards under which they work (labour standards) and the conditions under which they work (including E&S topic: Occupational health and safety (OHS)).
Labour standards are defined and protected through various and international conventions and instruments, including those of the International Labour Organization (ILO) and the United Nations (UN).
Public authorities have a central role in the promotion of the health, safety and security of the public, companies and their investors also have a responsibility to avoid or minimise risks and impacts that arise from the company’s activities during both routine and non-routine circumstances. The expectations of companies have increased in recent years and this trend looks set to continue.
Fund managers should ensure that, at a minimum, companies’ management systems are designed are compliant with local laws and regulations. In many cases, local regulations may not be fully aligned with good international industry practice (GIIP). Fund managers should assess companies’ alignment with international standards and, where appropriate, develop action plans to ensure that any gaps are addressed within a reasonable time frame.
Sectors
All sectors present OHS safety risks, and companies should implement management measures to eliminate and where not possible, mitigate these risks. Companies and investors need to have an understanding of the main hazards and risks present within an organisation. In some instances, investors may find that changing a pre-existing reactive and inadequate OHS culture is necessary in order to ensure effective OHS management. Fund managers should review recent independent audit reports and, if serious concerns are noted speak directly to the auditors. Where OHS risks are high, fund managers should consider bringing in consultants to advise them on the standard of companies’ OHS management prior to investment.
Sectors and activities with particularly high OHS risks include:
Medium- to large-scale construction (e.g. infrastructure development).
Extractives (mining and oil and gas).
Agriculture and forestry.
Fisheries.
Heavy manufacturing (e.g. cement, glass, foundries).
Manufacturing in regions or sectors with poor OHS management track records (e.g. garment industry in some Asian countries).
Activities in areas with significant security risks.
Risks
Poor corporate OHS policies and practices can lead to severe injuries, illnesses and even fatalities. Therefore, they represent a significant reputational risk and financial liability to companies and their investors. Failure to ensure safe and healthy working environments for staff and contractors can result in a range of business costs and negative impacts including:
Accidents (particularly serious accidents) can lead to downtime, and sites may be legally required to shutdown until an external authority gives them permission to re-open.
Loss of production and resulting losses due to issues such as power-down and power-up time.
Loss of or damage to equipment (e.g. vehicles, machinery).
Poor productivity due to difficult physical working conditions or impact on worker morale.
Strikes or other worker action protesting about poor working conditions and accidents and injuries.
Reputational damage due to media coverage of accidents and incidents.
Loss of or inability to secure contracts with major and international customers if rates of injury and death are high.
Fines and other penalties levied by local regulatory authorities.
High levels of turnover and absenteeism, leading to higher costs for recruitment and training.
Low levels of worker productivity due to poor terms and conditions, or poor working and living conditions, and low quality output, with higher levels of product defects, rejections and returns.
Loss of or inability to secure contracts with major and international customers, with consequent exclusion from international markets.
Fines and other penalties levied by local regulatory authorities.
Opportunities
Strong and proactive OHS management can lead to significant benefits for companies, including:
Enhanced efficiency and productivity of operations by ensuring good working conditions and taking actions to prevent accidents. These measures can boost morale and contribute to a company’s good reputation and its ability to hire new workers.
Many companies now require their suppliers to demonstrate best practice OHS policies and practices, to report according to international protocols and to undergo regular audits to assess compliance with their policies. Companies that are able to operate to these standards may qualify for more bids and win more contracts.
Better exit values and / or more options for exit.