Technical Report
Business of Safety Committee
American Society of Safety Engineers
Council on Practices and Standards

NOTICE: the American Society of Safety Engineers (ASSE) Council on Practices and Standards (CoPS) produced this white paper and set of recommendations. CoPS provides technical insight and expertise to ASSE’s membership, addressing the practice of the safety profession, its specific disciplines, and the standards of practice impacting its members and the general public.

CoPS is structured to provide balanced and sound assessment of matters related to the effectiveness and efficiency of the standards of practice in the Safety, Health, and Environmental (SH&E) profession. CoPS consulted with many organizations, entities, and governmental agencies while developing this white paper, however, it has not been reviewed by any entity other than ASSE. The contents of this white paper, and its recommendations, do not represent the views of any organization other than ASSE. The mention of trade names, companies, or commercial products does not constitute a recommendation or endorsement for their use.

The information and materials contained in this publication have been developed from sources believed to be reliable. However, ASSE accepts no legal responsibility for the correctness or completeness of this material or its application to specific factual situations. By publication of this white paper, ASSE does not ensure that adherence to these recommendations will protect the safety or health of any persons or preserve property.

Abstract

The American Society of Safety Engineers (ASSE) Council on Practices and Standards (CoPS) established a Business of Safety Committee in 2003. The purpose of the BoSC is:

The CoPS Business of Safety Committee will be a data gathering, document preparation, and source of professional information regarding ASSE's efforts to show that investment in Safety, Health, and the Environment (SH&E) is a sound business strategy and can positively impact an organization's bottomline. This committee generates documentations and guidance materials through the Vice President - Council on Practice and Standards. It monitors business of safety related issues to identify matters of Society interest, reviews appropriate business of safety related materials, and recommends position statements for review by the Council.

The purpose of this white paper was to research if businesses in the United States annually report their Return on Investment (RoI) in occupational safety, health, and environmental management. The second purpose of the white paper was to identify different methods used by American businesses to report their investment strategies. While the white paper below is admittedly not all encompassing, it does present a very valid, what the BoSC refers to as a “Snap Shot in Time” of this issue.

A scientific approach was used by the BoSC to gather the data. A series of surveys was initiated with different populations of SH&E professionals to capture data and anecdotal materials for review. The format of the surveys allowed the BoSC to analyze some of the different practices used in the profession as well as those used in American business from the overall perspective.

The approach used by the BoSC was to survey SH&E professionals about RoI reporting practices and then compare the survey results to reviews of annual financial statements published by publicly traded companies to see if the perceptions of SH&E professionals were consistent with what is published in such statements.

The data obtained from this initiative is interesting in that it indicates that SH&E professionals appears to underestimate the prominence that safety, health, and environmental management is given in company financial reporting systems. In terms of annual reports SH&E is not given wide recognition due to the design and intent of an annual report, a specific breakdown of the organization’s profitability.

However, the 10-K Form, which is also filed with the Security and Exchange Commission (SEC), gives a very significant different picture as firms include more information. SH&E is a significant part of many such reports than what was originally believed. The conclusion is that American business leaders have a much better grasp of the importance in investment in SH&E than previously believed by members of the American Society of Safety Engineers (ASSE).

Data and Survey

The methodology used by the BoSC Task Force to obtain data about annual reporting practices was based on asking the following question to ASSE members and other interested SH&E professionals. Perhaps the questions below should not be viewed as a survey in the traditional sense as they were open-ended with the intent of soliciting comments and responses besides simple “yes” or “no” answers.

1. Does your company/organization address occupational safety, health, and environmental management in its annual financial report?
2. Does it address the general topic of SH&E in its report?
3. Is there a numerical calculation or more of a general statement about dedication to SH&E? What is the formula you use?
4. Does your department put together a financial report of SH&E performance? If so - how?

Also - any financial statements, papers, studies, or materials you may have about this issue would be greatly appreciated. Please send them electronically or in hardcopy to the Society.

Our Survey Populations were as follows:

1. Members of the ASSE Management Practice Specialty – 2,999 members. The total response rate from this population was 386 members, 13%.

The Management Practice Specialty consists of SH&E professionals. Its goal is to serve those with management, supervisory or oversight responsibility for safety programs. This Practice Specialty publishes a periodic newsletter containing both Practice Specialty news and technical articles.
2. Members of the ASSE Risk Management and Insurance Practice Specialty – 2,761 members. The total response rate from this population was 346 members, 12.5%.

The Risk Management/Insurance Practice Specialty provides a global professional forum for advancing the risk management/insurance issues affecting SH&E professionals through networking opportunities, technical resources and a common voice on issues.

It sponsors annual technical sessions at the Society's Professional Development Conference. The Practice Specialty publishes a newsletter and distributes information on computer resources; legislative and regulatory developments pertinent to risk managers/loss control specialists. The Practice Specialty also sponsors an extensive awards program.
3. Member participants of the ASSE Society A-List – 680 members. The total response rate from this population was 333 members, 49%.

The Society A-list serve, is an electronic mailing list providing an efficient way to communicate with a large number of SH&E professionals choosing to participate. The A-List serve operates similar to a bulletin board system, except the conversation comes to an individual e-mail box. Each time any member of the list posts a reply to the conversation, it is distributed to the e-mail box of every member of the list.

Total Response Rate

The total response rate from the entire survey was 1,065 responses from a total population of 6,440 members for a rate of 16.5%.

The response rates to the questions are below:

Population Question #1 Question #2 Question #3 Question #4
Management 53%-Y, 44%-N 77%-Y, 18%-N 17%-Y, 76%-N 76%-Y, 22%-N
RMI P.S. 48%-Y, 50%-N 78%-Y, 19%-N 21%-Y, 73%-N 84%-Y, 14%-N
A-List 39%-N, 53%-N 86%-Y, 12%-N 17%-Y, 78%-N 69%-Y, 28%-N

 

The response rates will not add up to 100% as a small minority of responders answered that they were not able to answer the questions due to lack of knowledge. However, we did include those responses when calculating the actual response rates.

Comparison to Annual Reports
100 annual reports were reviewed off a website Annual Reports.Com, which is a source of research data for investors. The following description is taken from their site, which is:

http://www.reportgallery.com

AnnualReports.com (a division of IR Solutions) is the most complete and up-to-date listing of Annual Reports online. We are Americas largest annual report service. Our directory is a free Internet service that will enable potential investors to review a company's annual report in an easy convenient manner. Presently, investors obtain information on a company or fund by contacting the investor relations department and requesting a copy to be sent via traditional mail or by visiting their corporate web site on the Internet. But if you're researching several companies at once, you can save time by getting free reports from AnnualReports.com.

All publicly traded companies are required by the SEC (Securities and Exchange Commission) to publish certain financial data annually. The annual report is a publication that is distributed by these publicly traded companies to their shareholders. Most annual reports are very similar in the different types of information contained. Some of the common sections are: Letter from the chairman (or CEO) to the shareholders; Financial Highlights; Balance Sheets; Profit and Loss Statements; New Business; Year in Review; Projections; Outstanding Shares of Stock and Complete list of Board Members. Because this information is audited and required by the SEC, Annual Reports are an excellent way to familiarize yourself with a company before you invest.

The data from the annual report data is:

1. Does your company/organization address occupational safety, health, and environmental management in its annual financial report?

The review of the data indicates that five companies specifically addressed occupational safety, health, and environmental management in their annual reports.

2. Does it address the general topic of SH&E in its report?

The review of the data indicates that 73 companies addressed the general topic of safety, health, and environmental management in their annual report.

3. Is there a numerical calculation or more of a general statement about dedication to SH&E? What is the formula you use?

The review of the data indicated that none of the companies reviewed included specific numeric calculations, but out of 100 companies, seventy-three of them did address SH&E with statements in their annual reports in some capacity.

4. Does you department put together a financial report of SH&E performance? If so - how?

Of interest is that in addition to the annual report, the site also includes 10-K forms for each company. The 10-K Form is basically the report that most publicly traded companies must file with the SEC on an annual basis. It provides a comprehensive overview of the company's business and financial condition. It should be noted that some companies choose to send their Form 10-K to their shareholders instead of sending a separate annual report. Currently, Form 10-K must be filed with the SEC within 90 days after the end of the company's fiscal year.

The response rates between the actual financial report and the 10-K report provided to the SEC are quite different. While SH&E might not be listed in an annual report 91 of the 100 companies reviewed included SH&E in their 10-K form. Companies that had manufacturing interests addressed SH&E in every 10-K reviewed, 100%.

Review of Results

The end result of the survey was to indicate to the BoSC that reviewing a company’s financial report as it is written more from a general perspective and does not address the specifics of SH&E.

Annual reports are intended to give a reviewer a much broader perspective of a company’s financial performance and do not get into the detail of specific program reporting. The 10-K Form gives a much more detailed response and review of SH&E performance and investment.

In addition, it should be noted that the vast majority of those responding indicated that their SH&E departments do provide their own annual reports to address RoI issues. Several examples were submitted to ASSE.

However, what this does not answer is why SH&E professionals responded in a manner not consistent with the actual obtained data. It would appear that the biggest potential reasons for such disparity were:

1. The way in which the questions were asked was not clear to SH&E professionals.

2. SH&E professionals saw a difference between the public view of SH&E and that of the occupational level.

3. We did not differentiate between the Annual Report and the SEC required 10-K Form. If the questions had been directed at the 10-K Form the results could have been much different.

4. Not enough emphasis was placed on the internal annual reporting systems used by SH&E departments interacting within other company financial reporting systems.

Future Potential Research Initiatives

The 10-K Forms are excellent sources of information regarding the investment of American business into SH&E. Future projects should be considered that would review these 10-K forms and then compare them to the perceptions of SH&E professionals.

Member Comments

A number of members also submitted comments to go with the answers. In addition, there were submissions of SH&E annual reports and other types of documentation. We have included a collection of some member comments for review:

My current employer does not address occupational safety, health, and environmental management in its annual financial report, nor does my former employer. Both of these organizations are in the insurance industry and I'm sure it's obvious why this would not be a focus (i.e., employees primarily sit in front of computer monitors). However, a former employer with operations that encompass heavy manufacturing and has many represented employees does release annual reports on their record.

+++++

Your request for information is timely. Currently our company does not publish or address safety or SHE issues in a US report. Our Japan headquarters does publish a Global SHE report. However, that report does not include relevant US SH&E performance data for our facilities based in the United States. One of our goals is to begin reporting safety performance data along with environmental performance for the North American locations.

+++++

Because we have sites in Canada and Mexico, as well as the US, the obvious measures of incident rates, worker's compensation, EMR's may not be the best. Secondly, those measures are all downstream measures of safety. Does anyone track or publish any upstream measures? Very interested in what you turn up! If it’s possible to share any of your information it would be greatly appreciated!

+++++

Our firm does address Safety in its annual financial report. We address Environmental issues separate from safety and health. We use a separate section of the annual report to specify safety performance, but it is not tied to financial issues of ROI. The report covers data developed by safety professionals tied to goals and success of achieving those goals. It uses both leading and trailing data for the report. My business unit also provides an annual report on safety. It does not cover safety as a financial issue. Figures are tied to money but only in cost of safety not in evaluating the financial loss to the bottom line since this is tied to corporate goals.

+++++

My parent corporation publishes an EH&S annual report. The 2002 report was 86 pages of information gathered from all sites on a global basis. It contains numerous metrics exhibits along with narrative articles.

+++++

As a private company we don't have an annual report, but safety, safety statistics and loss history broken down by operating unit and manager is in the quarterly and annual report to both the Executive Committee and owners. We provide incident rates for workers compensation claims, and OSHA statistics compared against the same time period for the previous year and against BLS industry Rates. Loss histories are also provided and broken down by Group, Division, and Operation. Safety is a corporate or Group overhead item and we do not show a budget. We watch costs charged to safety related functions and expenditures.

+++++

Since we are working in the public sector there is not an annual financial report such as exists for a for-profit. Our annual activity report does not address ES&H, since its audience is interested primarily in our organization's technical accomplishments. However, the cost of ES&H support is a frequent topic in budget discussions and reports. As a group manager responsible for ES&H support of a facility, I review a monthly budget stewardship report prepared by our financial office, and present a quarterly status review to my management. Currently we are looking at how to spread costs fairly across our customer base rather than absorbing them all in the overhead and operations budgets.

+++++

Our company does address HSE in its annual report. It discusses the topic in general, and gives performance against a set of numerical targets. On the safety side, these targets are Lost Time Injury Frequency Rate, and an internal measurement of absenteeism that includes on-the-job illnesses and off-the-job illnesses and injuries. The Lost Time Injury Frequency Rate is based on the CEFIC system, which are injuries (not illnesses, as is done in the OSHA system) resulting in lost time away from work normalized to 1 million hours worked (versus the OSHA system of normalizing to 200,000 hours). On the environmental side, the measurements are tons of COD in wastewater, tons of VOC emissions to air, and waste reduction (tons of hazardous waste and tons of non-reusable waste). My department does not put together a financial report on HSE performance; that is done company-wide in Europe.

+++++

We have a one to two page spread in our annual financial report about our safety efforts, but I don't think safety is actually considered from a financial aspect.

+++++

The healthcare industry is in an infancy stage. We need to learn about the ROI on safety programs. Most of these organizations are non-profit organizations so they really are not bottom-line orientated. As such they don't include anything in their annual report regarding SH&E issues.

At our last board meeting, we did include the risk management data - incidents versus staffing. As you know the healthcare is experiencing shortage of nursing and other healthcare professionals. Results have been employee overtime, etc. As it was my first report, we didn't see correlation between staff injuries versus staffing.

+++++

Although it is not included in externally published information, a numerical scoring system used for determining the level of implementation and adequacy of our HSSE Management System. The scoring system measures how well our requirements are being implemented. I don't feel it is appropriate to share the details, however, I would be willing to discuss the approach further if someone wants to call and discuss. Our department submits our performance data into a central database that is used to consolidate HSE performance results across all of the business units. The data is submitted and audited by external auditors annually (by sampling various locations and business units; not everyone gets audited every year). Also, input for the annual reports is solicited and we contribute successes and accomplishments using that process.

+++++

Our firm is a private company so therefore we do not publish an annual report. However we do develop an annual safety report and provide to all the officers. The focus is a comparison of this year to last year to show the changes and define the reasons for the results (reductions). We also forecast what the next year will be and define those changes based on new businesses and safety business plans for each facility.