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January 20, 2010

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The recession and the impact on health and safety

It has been a year of doom and gloom for the economy, and jobs in health and safety are still thin on the ground. Nevertheless, say James Clayton and Scott Nadler, the recession has presented practitioners with opportunities that are just waiting to be grabbed.

The greatest booms in human prosperity followed the Great Depression and World War II, and economists are now telling us that the world can expect a similar period of growth, once all the bad debts and devaluations work their way through the financial system.

Indeed, in November last year, the Organisation for Economic Cooperation and Development (OECD), the body that represents the 30 most industrialised nations, revised its forecast that its member economies would experience a decline of more than 4 per cent to a slightly more modest 3.5 per cent. So the signs of global economic recovery may be on the horizon but how has the downturn affected health, safety and environmental management in businesses?

Listening to SHE professionals in a diverse range of industries, the gist of a lot of conversations recently has centred around resource constraints, job losses, and the need to ensure survival. Many of these conversations have provided an insight into businesses’ ‘coping mechanisms’.

More formally, we recently carried out research involving interviews with SHE leaders across a range of global organisations, which provided some interesting intimations. For example:

  • more than 90 per cent felt that economic conditions had affected their company;
  • 25 per cent said the SHE headcount was being reduced to save costs; and
  • although less than 20 per cent felt their health and safety programmes were being cut significantly to reduce costs, 70 per cent believed their SHE programmes had been affected.

So, how can SHE professionals help their organisations through these difficult and uncertain economic times? For some, the temptation might be to do as little as possible — to ask for nothing, hide under the table, and bury your head in the sand. But most SHE leaders know this approach won’t help their company, or their health and safety programmes.

Indeed, another striking statistic that came out of the aforementioned research is that 80 per cent of those surveyed believed the economic conditions had actually created an opportunity for SHE to demonstrate value by driving down costs. Clearly, the recession has been tough, leading to budget cuts, lay-offs, and huge uncertainty. SHE leaders still need to find ways to help their companies survive in the here and now.

But the recovery will be even tougher, with markets more sceptical and more risk-averse, and winners and losers across all sectors. Consequently, SHE leaders must also find ways to help position their companies to thrive later.

Adding value

Companies must keep one eye on the eventual upturn, which means maintaining their focus on protecting brand, reputation, competitive position and efficiency. You can’t stop doing things you’ve promised and still hope to have credibility later.

Companies’ perceptions of their own value have changed dramatically in the last year, amid plummeting share prices and liquidity. To get through the recession and position for the recovery, companies must rethink where their fundamental value lies.

Look at cutting costs

There are no sacred cows in business, so if you can create the same value in a lower-cost way, do it. Rethink your own work and take a hard look at what is really necessary and what’s obsolete.

Think about what you ask others to do that affects their costs, and look for efficiencies where you can share resources and skills with other functions. Use structured thinking to open up new opportunities for cost reductions outside of core SHE activities.

Harvest cash

The customer might be king but cash is God, as a client once told us. Obviously, it is essential to remain compliant, but consider how to shift spending from long-term projects to short-term activities that align closely with business needs — for example, quantifying property liabilities in advance of an asset sale.

During a review of one facility’s SHE-related expenditures it was noted that costs associated with employees taking time off owing to sickness were higher than expected. Many alternatives were reviewed, focusing on sources of injuries, injury severity, and case-management of injured employees. The most significant cost savings, however, were associated, very simply, with hiring a part-time nurse to work with injured employees, thereby accelerating the return-to-work process.

Get more value from compliance assurance

Optimise the time and money you spend on audits and inspections by using new approaches that focus more on driving improvement rather than on documenting failure. Shift some assurance spend away from auditing to higher-risk activities and higher-value approaches.

Take the example of a mining company which, for a long time, adopted a traditional approach of looking at a range of issues on one site during audits. Recently, it has been implementing issue-based audits across a number of operating sites. These audits target the company’s highest-risk issues, such as workplace transport and hazardous energy isolation. By following this approach, the firm is prioritising root causes of incidents and delivering maximum value in risk management to the organisation.

Protect your current revenues

You can safeguard your current revenues by the close monitoring of regulatory and customer requirements. Focus on avoiding any business interruption and take a fresh look at regulatory and permit compliance — not only in terms of possible risks to operations but also to inspire more flexibility in approach.

Also, consider how well you understand the health and safety performance of your key suppliers. Work with your supply-chain management to see who might be at risk of jeopardising the flow of products and services to market.

Protect your reputation and market position

Recessions divert everything: attention, investment, and resources. As a result, times like these are exactly when bad things happen. Many SHP readers will be all-too aware that safety performance can become less reliable in tough economic times. To ensure safety does not become a casualty itself, monitor commitments, goals and key performance indicators. For those who report publicly, be honest and open about which commitments can be kept and which must be sacrificed owing to economic and financial realities.

Ensure the attention on health and safety remains high, and engage more with senior managers. Show your people what’s really important to you by NOT cutting back on your investment in safety during difficult times.

Protecting values

Values are the things you keep doing even when it’s no longer convenient. The recession provides ample ground for demonstrating whether beliefs and priorities are truly part of a company’s values, or just short-term strategic positioning. In some areas, especially safety and the environment, the continuation of efforts still sends out a powerful message.

Reach out to your employees

Show your employees that the company is still making progress in forward-looking areas, such as climate change and behavioural safety. Use these areas to show your people that there is a future.

Also, try to figure out what health and safety skills you will need in the future and where they will be required and, naturally, try to keep those people who already have these skills. Use the downturn as a chance to do more cross-training by having health and safety people fill other roles, and create opportunities for others to pick up some valuable SHE experience.

Reach out to your business partners

Ensure your business partners understand, and have confidence in, the kind of partner you are. Equally important, explore opportunities to help them reinforce their own values in low-cost, efficient ways.

For example, one SHE manager found that collaborating closely with plant, equipment and material vendors was a significant factor in being able to quickly implement a new adhesive application process during the manufacture of steel doors. The company found that by using in-line heaters to reduce the adhesive viscosity, lower spray-gun pressures and higher-transfer efficiency equipment could be used, reducing emissions, and providing significant savings with a one-year payback.

Maintain the dialogue with other stakeholders

Continue to learn about customer concerns, even if there is little you can do about them at the current time. You should also continue to share performance, rather than retreating as if there’s something to hide. Incorporate customers’ changing needs — for example, safety management systems and energy efficiency — into your internal thinking so you will have the right offerings in place for the recovery.

Talk to existing customers and use this as an opportunity to get closer to them. Monitor market trends and customer expectations to avoid anything perceived as “bad” in, or associated with, your products or services. Carry out life-cycle analyses of key products and services to look for both opportunities and risks, and to prepare for challenges from competitors, the media, and outside stakeholders.

One final example: a piling contractor, who works in a traditional and pretty competitive construction environment, had seen one of its key rivals gain market advantage through actively embracing environmental management issues. Rather than taking the knee-jerk approach and copying its competitor, the company took the time to consider its response and is now undertaking life-cycle analysis of different piling options. This should help it identify opportunities for cost savings in its core business area, which it can then pass on to clients. It should also generate some tangible information that could be shared with its employees to generate interest in environmental issues.


In many ways the recession presents an opportunity. Complacency has been broken, and many companies face important but difficult decisions, which they might have avoided taking in better times. The lesson from earlier recessions is: it’s easier to make hard decisions in hard times. Options that may have been categorised as too disruptive in the past may now be exactly what is needed.

In the health, safety and environmental world, this can create many opportunities, such as freeing up money for investment in new, more effective assurance approaches, by reducing conventional auditing; and shutting down and preparing to shed operations that represent unacceptable levels of ongoing risk, but whose business potential was always “too good to throw away” in the past. These steps may take SHE leaders outside their traditional areas of responsibility, and even comfort, but it may be exactly the type of tangible performance that senior managers want to see.

Senior-management concerns in times like these are clear: execution, flexibility, managing uncertainty — and all with an extremely limited attention span as they fight fire after fire. How long will the recession last? And what will the recovery look like? These are the questions that make decision-making so difficult for senior managers.

The toughest part of corporate decision-making in this period of uncertainty is how much to focus on survival and how much to focus on positioning for the recovery. The most attractive choice is to not have to make a choice, but solutions that help with both survival now and success later take uncertainty out of the decision. Those solutions will make the decision-making process for senior management an easy one — a grateful rarity in recent economic experience.

James Clayton is a principal consultant in Environmental Resources Management’s (ERM) performance and assurance team, while Scott Nadler is ERM’s director of strategic development.

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