OF SAFETY ENGINEERS
1800 East Oakton Street
July 24, 2002
The Honorable Paul David Wellstone
Dear Chairman Wellstone:
The American Society of Safety Engineers (ASSE), on behalf of its 30,000 member safety, health and environmental professionals, congratulates you for your leadership in holding a Subcommittee on Employment, Safety and Training oversight hearing on the Occupational Safety and Health Administration (OSHA) and the Mine Safety and Health Administration (MSHA).
ASSE's members are the lead professionals responsible for ensuring that Americans come home from work each day healthy and safe, so they understand fully the important role these agencies play in helping ensure that such an outcome is possible. The Subcommittee - as does Congress as a whole - plays an essential role in both tasking these agencies to their responsibilities and assisting them where necessary to reach their potential. While these agencies both have accomplished much in improving workplace safety, we share your position that more action is both possible and necessary. Given that shared understanding, the Society respectfully asks that the following comments be included in the record of the July 11 hearing.
No discussion of OSHA at this time could proceed without recognizing the positive leadership of Assistant Secretary John Henshaw. From our members' viewpoint, Assistant Secretary Henshaw has made a significant effort to institute changes at the agency that reflect a creative use of the tools available to him and his staff. As a career safety and health professional himself and a long-time member of ASSE, Assistant Secretary Henshaw has brought a wealth of real-world experience in getting things done that has encouraged a new perspective at the Agency. In many respects, the changes he is urging mirror what ASSE has been encouraging OSHA to do for many years.
ASSE has long called for OSHA to reach out to our members and other stakeholders to increase cooperative efforts aimed at achieving common workplace safety goals. With that same intent, Assistant Secretary Henshaw has aggressively pursued partnerships and alliances on a variety of issues with a long list of stakeholder organizations. Similarly, ASSE has long called for an increased emphasis on professional certification and continuing education for OSHA compliance officers and headquarters staff, so we are pleased that Assistant Secretary Henshaw has aggressively tasked OSHA's management to encourage increased professionalism and has reached out to ASSE to help fulfill this goal.
Evidence of this new, more practical approach can be found in OSHA's recent effort to move ahead with the difficult issue of ergonomics. Under Assistant Secretary Henshaw's leadership, OSHA has begun establishing industry-specific guidelines, cooperating with forward-thinking industry leaders and professional groups to establish opportunities to share best practices and other information that should help encourage improvement in health and safety among an industry's workers. ASSE understands fully that such guidelines do not substitute for a stand-alone ergonomics standard. ASSE's own position, established in 1997, calls for a standard that is performance-based, that is not one-size-fits-all, and that encourages cooperative efforts to find workable solutions. We stand firmly by that position and will work to see that a standard is enacted.
Yet, the Society recognizes that much can be accomplished through guidelines and will support OSHA's efforts in making sure they work. While not the best solution, OSHA's ergonomic guideline initiative will help improve workplace health and safety. While not the final solution, it is a significant step in the right direction. ASSE has pledged the support of its members in working with OSHA and other stakeholders to ensure that these guidelines are appropriate, technically and scientifically accurate, and reflect the best practices for each industry sector covered.
While members of the Subcommittee will not agree with every decision made under Assistant Secretary Henshaw's leadership, ASSE urges that in those areas where there is agreement - especially in the area of helping OSHA increase professionalism among its compliance staff - the Subcommittee support Assistant Secretary Henshaw in whatever way it can.
Like many in the safety and health community, ASSE was concerned when OSHA released its regulatory agenda at the beginning of this year. The agenda no doubt represented a decrease in regulatory aggressiveness on behalf of the agency. While ASSE does not support regulatory action for its own sake, workplace safety in this nation has not reached the point where appropriate, reasonable regulatory action is unnecessary.
Despite that concern, ASSE is willing to give OSHA the benefit of the doubt on its newly formed regulatory approach. There is merit in Assistant Secretary Henshaw's contention that OSHA's previous regulatory agenda spread Agency resources too thin and resulted, in the long run, in too few regulatory successes. The pursuit of regulatory actions that stakeholders cannot accept, that do not reasonably address problems with practical solutions, or that cannot survive legal challenge does not further OSHA's responsibilities to America's workers to increase on-the-job safety. Moreover, the current agenda focuses on those activities that may reasonably be accomplished in the coming year, rather than setting unrealistic long-range projections. We hope that OSHA will revisit some of the rulemaking areas that are currently deemed lower priorities.
ASSE is encouraged that OSHA's has retained in its regulatory agenda the initiative formerly known as the program safety and health rule, now apparently entitled the injury and illness prevention rule. Promulgation of this rule is ASSE's most important regulatory priority. Requiring all workplaces to have in place a comprehensive program that addresses the particular safety and health difficulties at a workplace as well as a plan for addressing those problems is the key element missing in occupational safety. In hindsight, requiring such a plan seems so elemental that it is difficult to see how such a requirement was not made part of the initial occupational safety and health requirements. Rather than being an additional burden on employers, such a program would encourage employers to identify difficulties before they become expensive problems. Attached is a copy of ASSE's recent White Paper Addressing the Return on Investment for Safety, Health and Environmental Management Programs, which documents the cost savings that result from investment in workplace safety.
Further, and contrary to perceptions, an injury and illness prevention plan would allow the establishment of a cooperative effort between OSHA and an employer to address these problems. With a plan in place, the focus of both the employer and OSHA compliance offers can more readily be focused on finding solutions to identified problems instead of in finding problems, which too often is the focus of OSHA inspections now. ASSE looks forward to the end of the year, when OSHA indicates that action on an injury and illness prevention rule will begin and encourage the Subcommittee to join with us in supporting timely promulgation of such a rule.
While the Society supports giving OSHA the opportunity to proceed with a regulatory agenda in the manner it has indicated, the Subcommittee's role here is to watch closely that this approach is effective in bringing meaningful solutions to workplace health and safety problems. In this instance, less regulatory activity could result in better regulation, but Congressional oversight is necessary to help guarantee that result.
ASSE agrees with those members of Congress who have expressed concern that OSHA's Permissible Exposure Limits (PELs) are grossly outdated and that the agency has failed to set PELs for many substances that were not in existence or in common usage when the current PELs were established in the early 1970s. We have submitted a statement for the record, pursuant to the July 16, 2002, House Education and Workforce Committee's Subcommittee on Workforce Protections' hearing on this issue.
If Congress does move forward with legislation establishing a federal advisory committee to determine which PELs are appropriate for fast-track rulemaking through a consensus process, ASSE pledges its support and involvement in this process and will nominate qualified individuals to serve on this advisory committee.
One of ASSE's thirteen practice specialty groups is a Mining Practice Specialty section comprised of members who provide safety and health consultation and training to the mining industry. Therefore, we have followed with great interest this Committee's oversight of MSHA and urge that such active interest in the agency continue.
As stated above with respect to OSHA, ASSE is likewise concerned that MSHA has removed several significant actions from its regulatory agenda - including its air contaminants rulemaking efforts that commenced in 1989. We hope that, if Congress becomes involved in additional actions on the OSHA PELs issue, it will also include consideration of similar expedited rulemaking so that MSHA's air contaminant standards can also be improved since these standards, too, were promulgated in the 1970s.
ASSE has been generally pleased with the direction that MSHA has taken under the leadership of Assistant Secretary Dave Lauriski, who is also an ASSE member and Certified Mine Safety Professional. ASSE participated in two of the agency's initial stakeholder meetings and believes that, if the recommendations that resulted are put into action, they will improve communication and cooperation between the agency, labor and industry, increase compliance, and advance safety and health in the mining industry.
Enforcement is a critical component of the agency's mission, but ASSE believes that better utilizing "Compliance Assistance Visits" and targeting inspection emphasis toward those mines with documented problems or high injury/illness rates -- similar to OSHA's targeted program -- will be a more effective and efficient use of agency resources. Although MSHA is currently bound to inspect each surface mine twice a year and each underground operation four times a year, MSHA could be more flexible in defining what constitutes an "inspection" so as to use its personnel where they can do the most good.
Voluntary Consensus Standards
In conclusion, ASSE understands the difficult task both OSHA and MSHA face in bringing to life regulatory initiatives. To help both agencies meet their regulatory missions, ASSE encourages OSHA and MSHA to consider a greater reliance on voluntary consensus standards in updating or creating new standards. Much of the difficulty the agencies face in finding meaningful yet workable solutions has already been resolved through the voluntary consensus standard process. This approach can more quickly result in safety and health improvements, whether through negotiated rulemaking, standards advisory committee processes, or, where appropriate, the use of direct final rules. Congress advocated such reliance on voluntary consensus standards in the Technology Transfer Act of 1996, which was formalized through OMB Circular A-119. To date, the safety agencies have lagged behind other government sectors in putting this approach to the test.
Again, ASSE commends you for your attention to the variety of challenges facing OSHA and MSHA. The Society's members understand the challenging responsibilities both OSHA and MSHA have been given as regulatory agencies, including the duty they have to firmly and fairly enforce workplace safety standards. We stand ready to help in whatever way the Society can to make sure that these agencies can succeed in their mission.
Mark D. Hansen, PE, CSP
AMERICAN SOCIETY OF SAFETY ENGINEERS
ADDRESSING THE RETURN ON INVESTMENT
NOTICE: This report, white paper, and set of recommendations were produced by the ASSE Council on Practices and Standards (CoPS) of the American Society of Safety Engineers (ASSE). CoPS is a council of ASSE, which provides technical insight to ASSE leadership addressing the practice of the safety profession, its specific disciplines, and the standards of practice impacting our members.
The ASSE Council on Practices and Standards is structured to provide balanced and sound assessment of matters related to the effectiveness and efficiency of the standards of practice in the safety profession. The Council consulted with many organizations, entities, and governmental agencies while developing this report and white paper, however, it has not been reviewed for approval by any other entity than ASSE. The contents of this report, and its recommendations, do not represent the views of any other organization other than ASSE. The mention of trade names, companies, or commercial products does not constitute any recommendation or endorsement for use.
The information and materials contained in this publication have been developed from sources believed to be reliable. However, the American Society of Safety Engineers (ASSE) accepts no legal responsibility for the correctness or completeness of this material or its application to specific factual situations. By publication of this paper, ASSE does not ensure that adherence to these recommendations will protect the safety or health of any persons, or preserve property.
Approved by the ASSE Board of Directors
SUMMARY: ADDRESSING THE RETURN ON INVESTMENT
(ROI) FOR SAFETY, HEALTH, AND ENVIRONMENTAL (SH&E)
The implementation, maintenance, and improvement of SH&E programs are of significant importance to this country as the economy of the United States moves toward more of a global perspective. Such programs positively impact all Americans and specifically those who work at all levels of the public and private sectors in technology development, manufacturing, training, financial analysis, personnel, academia as well as the final end user. An effective SH&E Program not only benefits and protects the organizations implementing such a program, but also furthers the interests of the United States in a globally competitive environment.
The American Society of Safety Engineers (ASSE) knows
from data and anecdotal information that investment in a SH&E program
is a sound business strategy, for any organization regardless of size,
and will lead to having a positive impact on the financial bottom line.
ASSE calls on governmental agencies such as Occupational Safety and Health
Administration (OSHA), Mine Safety and Health Administration (MSHA), Environmental
Protection Agency (EPA), Consumer Product Safety Commission (CPSC), and
the National Highway Traffic Safety Administration (NHTSA), etc
to do more in regard to showing that SH&E management is more than
simple compliance. The private and public sector should be encouraged
to work together to show American business and industry that SH&E
is not only required under the law, but should become and remain a core
1. Negligent or willful injury and wrongful death suits can be brought where contractors or worksite visitors may be involved, as well as under certain state laws (Maryland, West Virginia and Ohio are some examples), which permit employees or their survivors to sue employers in tort where egregious or intentional behavior, or ultra-hazardous activities are involved.
ASSE has taken the position that the days are over when companies can view safety and health violations as the status quo, and regard SH&E violations and the attendant civil penalties as another "cost of doing business." For one thing, penalties have been increasing in dollar amount. In addition, knowing violations that result in the death or serious injury of a worker may be prosecuted at the state level under criminal laws, or in a referral by a government agency to the U.S. Department of Justice.
The Hidden Costs of Failed Safety and Health Systems
Moreover, as more information concerning a company's compliance and injury/illness experience becomes publicly available over the Internet and from the federal agencies through Freedom of Information Act (FOIA) requests, foes of industrial growth may use this data to defeat permit applications or zoning change requests. Part of being a "good corporate citizen" - rather than a company that no one wants in their backyard - is offering a safe and healthful work environment to the local residents.
Companies may also "externalize" costs associated with workplace injuries or illnesses, to the detriment of their safety and health program management. If some other organization (such as worker's compensation, social security, welfare or other insurance) pays the costs, corporate management may have a disincentive to control hazards. ASSE believes here is an excellent example of being "penny wise and pound foolish."
When insurance pays for the immediate costs of employee injuries, ultimately we will all pay either in the form of higher premiums, inability to obtain insurance completely, or passed-through costs to the consumer. Conversely, when there are fewer accidents, society saves as a whole. Fewer hospitals, medical professionals and rehabilitation facilities will be needed, and employee productive capacity will not be reduced as a result of occupational injury, disease, and death.
The current Secretary of the Treasury, Paul O'Neill, who also served as the long-time chairman of Alcoa Steel Corporation, has taken the position that investment in safety, health, and the environment is good for the economy, country, the firm, and its workers. Part of his company's (Alcoa) key business strategy included emphasis on occupational safety, health, and environmental management. His belief is that investment in SH&E makes sounds business sense and should be a cornerstone of an organization's goals and objectives. During his nomination, appointment, and confirmation as Secretary of the Treasury, Mr. O'Neill consistently spoke in favor of ongoing investment in SH&E as positive generator for organizations .2
Some statistics and examples to consider when reviewing the "Economics of Safety"3 :
Based upon a speech given by then Alcoa Chairman Paul O'Neill to the Council
for Excellence in Government on May 10, 1999 titled: Excellence in Government-How
do We Get It?
· Nearly 50 workers are injured every minute of the work week
· 17 workers die on-the-job each day
· Workplace injuries will cost society $128 billion in losses this year, which equals one-quarter of each dollar of pre-tax corporate profits
· Indirect costs of injuries may be 20 times the direct costs -- Indirect costs include: training and compensating replacement workers; repairing damaged property; accident investigation and implementation of corrective action; scheduling delays and lost productivity; administrative expense; low employee morale and increased absenteeism; poor customer and community relations
· To cover the cost of a $500 accident, an employer
would have to:
SH&E Investment as a Core Business Strategy
(4) Federal/State safety rules (31 percent);
Examples of Savings Attributable To SH&E programs 5
Survey by the National Federation of Independent Business, Motivating
Safety in the Workplace (June 1995).
· A SH&E Director for an environmental services company in Massachusetts reported that its tracking data indicated $8 saved for each dollar spent on a quality SH&E program.
· A coal mining company in Charleston West Virginia has attained a competitive advantage through investment in SH&E programs. The company claims its worker compensation rate is $1.28 per $100 in payroll as opposed to its competitor's rate of $13.78.
· Fall protection program implementation reduced one employer's accident costs by 96 percent - from $4.25 to $ 0.18 per person-hour
· Implementation of an OSHA consultation program reduced losses at a forklift manufacturing operation from $70,000 to $7,000 per year
· Participation in OSHA's Voluntary Protection Program has saved one company $930,000 per year and the company had 450 fewer lost-time injuries than its industry average
· A SHARP (Safety & Health Assessment & Research for Prevention Program) participant reduced its lost workday incidence rate from 28.5 to 8.3 and reduced insurance claims from $50,000 to $4,000 through decreases in both direct and indirect losses through a reduction its number of back and shoulder injuries.
· Implementation of an improved safety and health program reduced Servicemaster's worker's compensation costs by $2.4 million over a two-year period
· A manufacturer using a state consultation program reduced its worker's compensation modification rate from 1.7 to .999, and saved $61,000 on its worker's compensation insurance premiums\OSHA VPP sites saved $130 million in direct and indirect injury/illness costs in 1999.
· OSHA's Office of Regulatory Analysis has stated: our evidence suggests that companies that implement effective safety and health cans expect reductions of 20% or greater in their injury and illness rates and a return of $4 to $6 for every $1 invested...
· In their 9/2001 article titled: Measuring Safety's Return on Investment, Susan Jervis and Terry R. Collins, make the argument that there is a direct correlation between a company's performance in safety and its subsequent performance in productivity and financial results. They pointed out that in the Forbes 1999 Financial Rankings, among those listed ten of the most-successful U.S. businesses were participants in the OSHA VPP program.6
6. From the article: Measuring Safety's Return on Investment, Susan Jervis and Terry R. Collins, ASSE Professional Safety Journal, September 2001.
The VPP is comprised of program elements that have been demonstrated to reduce the incidence and severity of workplace injuries and illnesses.
v The "STAR" program is the most highly selective program and is for applicants with occupational safety and health programs that are comprehensive and successful in reducing workplace hazards. Lost workday rates are 53 percent below national averages.
v The "Merit" level is for companies with good programs that are looking to improve and proceed to the STAR level. Lost workday rates are 35 percent below national averages.
v The "Demonstration" level is designed for contractors who meet the requirements as STAR-level companies but are not otherwise eligible for the STAR or Merit designations.
VPP participation is strictly voluntary and OSHA keeps application information confidential. Participating employers must still comply with OSHA standards, but they are exempt from programmed OSHA inspections (although not from those prompted by employee complaints or triggered by fatalities, catastrophes or significant leaks and spills). OSHA claims the following ROI for companies participating in VPP: 7
Taken from the U.S. Occupational Safety and Health Administration (OSHA)
· Injury Incidence Rates: In 1994, of the 178
companies in the program, 9 sites had no injuries at all. Overall, the
sites had only 45% of the injuries expected, or were 55% below the expected
average for similar industries.
· Lost Workday Injury Rates: In 1994, of the 178 companies in the program, 31 had no lost workday injuries. Overall, the sites had only 49% of the lost workdays expected, or were 51% below the expected average for similar industries.
· While protecting workers from occupational safety and health hazards, companies following the management guidelines mandated for VPP membership also experience decreased costs in workmen's compensation and lost worktime, and often experience increased production and improved employee morale.
· The lost workday case rate at Thrall Car Manufacturing Company in Winder, Georgia decreased from 17.9 in 1989 when the facility began implementing a VPP quality safety and health program to 4.6 in 1992 when the plant was ready to qualify for the Star Program. In 1994 the rate was 0.6. From 1989 when Thrall Car's Winder, Georgia plant began implementing its programs to qualify for the VPP and 1992, workers' compensation costs dramatically declined by 85%, from $1,376,000 to $204,000.
· At Monsanto Chemical Company's Pensacola, Florida Plant, which employs 1600 workers, the Lost Workday Case Rates have steadily declined during the period the worksite was implementing effective safety and health programs and in the four years since approval to the VPP. The rates fell from 2.7 in 1986 to 0.1 in 1994.
· Mobil Chemical Company has brought all of existing plants (plastics production and chemical plants) into VPP. OSHA reported that the company's recordable injuries were reduced 32%, lost workday cases were reduced 39%, and the severity of cases was reduced by 24%. Also, the company reduced its workers' compensation costs by 70 per cent, or more than $1.6 million, from 1983 to 1986, during the years it was qualifying its plants for the VPP. This reduction has been sustained through 1993. Mobil Oil Company's Joliet, Illinois refinery experienced a drop of 89 percent in its workers' compensation costs between 1987 and 1993.
· Occidental Chemical Company determined that as their Safety Process Systems Implementation percentage increased company-wide their Injury/ Illness rate decreased from 6.84 in 1987 to 1.84 in 1993, a 73 % decline.
· In the construction industry, Georgia Power Company brought two large power plant construction sites into the VPP in 1983 and 1984. By 1986, one site had reduced its total recordables by 24 per cent and its lost workday cases by a third. The other site reduced recordables by 56 per cent and its lost workday cases by 62 per cent. At Georgia Power's two power plant construction sites, the direct cost savings from accidents prevented at one site was $4.14 million and was $.5 million at the other for 1986 alone.
· During three years in the VPP, the Ford New Holland Plant noted a 13 per cent increase in productivity and a 16 per cent decrease in scrapped product that had to be reworked.
· During a recent evaluation of the Kerr-McGee Chemical Corporation Mobile, Alabama plant in July 1991, the VPP team found that at the same time, work related injuries continued to decline, production hit an all time high that exceeded the goal by 35 percent.
Additionally, OSHA has received considerable information on improvements in morale, productivity, and product quality. Although anecdotal in nature, these improvements are referred to frequently enough by participants in the VPP to indicate that there is a good possibility of a direct relationship between improved management of safety and health protection and these benefits.
OSHA E-Cat Initiatives
OSHA's e-CAT program consists of electronic Compliance Assistance Tools ("CATs") that provide guidance information for employers to develop a comprehensive safety and health program. Such programs are required by some states, although there is currently no such federal OSHA requirement.
OSHA's safety and health program management rule is under development, and its future will depend on the regulatory priorities of any Administration. The draft rule, released in October 1998, would have covered all general industry employers and applied to hazards covered by the General Duty Clause and existing OSHA standards. The proposal set forth the following core elements:
· Management leadership and employee participation
(hold managers accountable for carrying out safety and health responsibilities
in the workplace and provide them with the authority to do so; and, provide
employees with the opportunity to participate in establishing, implementing
and evaluating the program);
· Information and training (provide employees with information and training in the safety and health program with respect to the nature of hazards, what is done to control the hazards, and the provisions of applicable standards); and
· Evaluation of program effectiveness (at least once every two years, after the initial program development).
Existing programs would be grandfathered as long as they satisfied the basic obligation for each core element and the employer could demonstrate the effectiveness of its program. The rule would also require employers at multi worksites to provide information about hazards, controls, safety and health rules and emergency procedures for all workers. ASSE commented extensively about this rule in regard to its technical applications, however, the Society remain steadfast in its belief that more needs to be done to encourage the development and implementation of SH&E programs.
Finally, OSHA has the "SHARP" program (Safety
and Health Achievement Recognition Program), which provides incentives
and support to develop, implement and improve effective safety and health
programs. Participating employers may be exempted from OSHA programmed
inspections for a
Even where not mandated by law, SH&E management programs are critical to the safety, health, and environmental performance of an industrial employer. Companies that are truly committed to excellence should consider participation in the VPP or the other consultation and professional development programs offered by OSHA or through professional safety organizations such as ASSE.
Similar savings were noted in Alberta, Canada, where the Worker's Compensation Board announced last year that over $2 million in premium refunds would be distributed to more than 400 employers who registered in the "Partners in Injury Reduction" (PIR) program. Other PIR program benefits included lower worker's comp premiums, increased worker productivity and minimized accident costs. The average lost-time claim rate at PIR participant worksites dropped more than 20 percent.
Private Sector Initiatives
v Guaranteeing management commitment,
v Publicizing the company's commitment to safety throughout the community,
v Including discussions of safety issues during employee interviews,
v Offering employee wellness programs (healthier employees are less likely to be injured on the job),
v Training employees thoroughly, with new hire orientation and use of Job Safety Analysis (a blueprint for carrying out each step of a job safely),
v Conducting accident investigations and creating a case management program, and
v Implementing an effective SH&E program that involves total commitment from employees and management based on a "team" approach.
Innovest Strategic Value Advisors, in an annual investment research report on the Global Auto Parts market, reported that its results indicated that firms investing in environmental management posted accumulated returns over 48.8% higher than environmental laggards over a 3-year period, and 6% higher returns over 1-year. The report further indicated that Denso Corporation and Snap-On Tools emerged as the top ranked companies in this annual survey, which assessed the performance of 18 of the world's leading automotive parts and supply companies in areas such as environmental management, resource usage, climate change, product life cycle analysis and sustainability-related profit opportunities in new markets.9
In addition, a subsequent study of the electric utility industry, found that portfolio managers who screen out companies with poor environmental records can outperform others by more than 7% annually. Finally, a news report shows that the top environmental performers in the computer sector have outperformed their industry rivals financially by 25% since the beginning of 1998. The report, The Computer Industry -- Hidden Risks and Value Potential for Strategic Investors, calls into question the view of the environment as a cost center and presents evidence linking superior environmental performance with competitiveness and profitability. Citing Dell Computer Corp. as one example, the report says the company's energy-efficiency initiatives already have generated cost savings of 37%.10
Based upon a study conducted by Innovest Strategic Value Advisors, New
York, NY, 2001.
Value of Company/Organizational Reputation 11
Related ASSE Position Papers
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