Safety-focused firms are 20pc more likely to go to the wall
Businesses that are less strict can benefit financially, say researchers
EMPLOYERS with better staff safety records are 20pc more likely to go under, according to a new study of 25 years of health and business records.
The findings come amid heightened risks associated with Covid-19, and suggest businesses that are less strict about enforcing new safety measures stand to benefit financially.
“Unfortunately this is not the happiest research finding,” according to Mark Pagell, professor of sustainable supply-chain management at UCD Michael Smurfit Graduate Business School and one of the authors of the report.
His team in Dublin was part of a global group of researchers that assessed 25 years of company records and incidents where an employee was absent for three days or more due to a work-related incident.
They found that companies that suffer fewer accidents are more likely to go out of business.
That shows that companies could have a competitive advantage by cutting corners in health and safety, which drives down their costs, while the cost in terms of hospital admissions is externalised – or pushed onto the public, Prof Pagell said.
The effects seen in the US would be even more stark here because the health system is primarily taxpayer funded, he said.
“Our research suggests that businesses that enhance their own prospects over worker safety will be more likely to survive as they will be both minimising their costs and maximising their cash-flow,” he said.
The research shows that lesssafe businesses gain in the short term and do not suffer in the longer term.
In contrast, safety-conscious businesses that allow more time for tasks or have better safety equipment or policies are at a financial disadvantage and more prone to fail, he said.
In the context of Covid-19, a business that has an unsafe work environment is also likely to be less safe for customers.
“To put that into the current context, some businesses will reopen the second they are allowed after Covid-19 restrictions ease and with the minimal legally mandated protections. Others will wait until they are sure they have plans in place to fully protect their workers and customers,” Prof Pagell said.
There isn’t evidence that health and safety regulations are lacking, he said.
The answer is to have a credible threat of inspections and enforcement.
“If you look at Covid-19 and workplaces, I think there will be around 67 inspectors for the entire country.”
Some businesses may take the view that they are unlikely to be inspected.
“Meanwhile their more cautious competitors will in essence put their own survival at risk by better protecting the rest of us.”
Government and employer bodies need to think about rewarding businesses that do protect their workers and to protect them from being punished financially, he said.
The study was published in the journal ‘Management Science’ and was the result of a collaboration between the researchers at UCD Smurfit School, Oregon State University, Universitat Ramon Llull in Spain and Ohio State’s Fisher College of Business.