Remembering Why Occupational Health and Safety Matters to Investors

On World Day for Decent Work, observed every year on October 7, activities around the world highlight the importance of universal access to safe, productive work undertaken in conditions of freedom and dignity. For institutional investors, it is a good opportunity to consider the important role decent work plays in managing risks and creating long-term value for shareholders.

The agenda of Decent Work was born at the International Labour Organization (ILO), which brings together governments, industry and trade unions. The ILO believes work is a “source of personal dignity, family stability, peace in the community, democracies that deliver for people, and economic growth that expands opportunities for productive jobs and enterprise development.” Whether you are betting on Bottom of the Pyramid growth or worried about unexpected workplace accidents, viewing your portfolio through a Decent Work lens could add unexpected value.

Occupational Health and Safety (OHS) is among the workplace issues most widely recognised by investors. Many corporate Boards of Directors have a standing health and safety committee and simple statistics on workplace fatalities or lost time are often included in corporate sustainability reports. But are investors taking OHS into account as much as they should?

What is Occupational Health and Safety?

According to the ILO, “Occupational Health is the promotion and maintenance of the highest degree of physical, mental and social well-being of workers in all occupations by preventing departures from health, controlling risks and the adaptation of work to people, and people to their jobs.” It includes considerations of all conditions and factors that may negatively impact the health and safety of employees, contractors, temporary workers, and visitors to the workplace.

Is there a right to a healthy and safe workplace?

The right to a safe and healthy work environment is recognized in international agreements and standards. These standards are aimed at protecting workers by reducing accidents and injuries at work and protecting workers from foreseeable occupational hazards. References to workers’ rights to a safe and healthy work environment can be found in the following key international human rights instruments as well as in the following international good practice guidance and standards:

What are the costs of poor OHS management?

Workplace health and safety failures have important, far-reaching, long-term implications for employers, workers and their families, the economy, and society at large. An estimated 2.2 million work-related deaths and an estimated 160 million new cases of occupational disease are reported annually. According to ILO estimates, the loss of global Gross Domestic Product caused by work-related accidents and diseases is 4%. In Europe, the estimated cost of occupational accidents in 2000 was €55 billion per year. And that doesn’t including work-related diseases, which result in approximately twice as many lost days as accidents and at least two times more often lead to temporary and permanent incapacity.

In Canada, approximately a thousand workers die annually as a result of their work and more than 300,000 suffer injuries serious enough to warrant time off work. According to Health Canada’s most recent analysis, the value of lost production due to premature mortality is estimated at $33.5 billion; the value of production lost due to long-term disability is estimated at $32.3 billion, and the value of production due lost due to short-term disability is estimated at $9.8 billion.

Awareness is also increasing that workplace mental health is important to companies’ bottom line through lost productivity and absenteeism. The economic burden of mental illness in Canada was estimated at $51 billion in 2003; it is also the number one cause of disability in Canada, accounting for nearly 30% of disability claims and 70% of the total costs.

Why should investors be concerned about corporate OHS practices?

Superior OHS practices guard against the direct costs of health and safety failures as well as legal, regulatory and reputational risks; at the same time, they promise better shareholder value through the retention and development of human capital.

The destruction of shareholder value as a result of a major accident was well illustrated by BP’s Gulf oil spill which at one point shaved half of the value from the company’s share price, but this was only the most recent of a succession of BP safety failures, including its high profile 2005 Texas Oil Refinery Explosion which killed 15 workers and injured 170 others. But even less spectacular failures may hurt shareholders, as well as employees. Recent academic research focusing on the market impact of safety, for example, shows a negative correlation between announcements of OHS prosecutions and equity returns.

Although industrial accidents are often immediately visible, occupational health issues can be as destructive to shareholder value. If in doubt, mention workplace exposure to asbestos to anyone who owned shares in James Hardie, Owens Corning or W.R. Grace in the 1980s and 1990s. A less obvious and more modern occupational health issue is sometimes called precarious work. It is the low wage, insecure employment promoted in the name of workplace flexibility and global competition. It often results in limited access to extended health benefits and increased levels of stress, addiction, heart disease, and mental health conditions that ultimately result in poor productivity and high turnover.

What are the obstacles to integrating OHS in investment decision-making?

Although occupational health and safety considerations are moving more prominently into investment decision-making, investors still face challenges in gaining a fuller understanding of how OHS affects shareholder value. These include:

How can institutional investors exert influence to improve workplace health and safety?

Institutional investors can take some simple steps to address OHS risks:

As part of its ongoing commitment of exploring the theme of decent work, SHARE will release a new study about how investors can incorporate occupational health and safety in their investment decision-making. This report is part of SHARE’s Investing in Decent Work project, which assists institutional investors in implementing the high standards of labour and human rights. If you would like more information contact Noushin Khushrushahi, Research Analyst (Social), at [email protected].

For more information on the World Day for Decent Work, please visit


Takala, J. Introductory report: Decent Work – Safe Work, Geneva: ILO, 2005.

Health Canada, Economic Burden of Illness in Canada, 1998, 2002.

Government of Canada, The Human Face of Mental Health and Mental Illness in Canada, 2006.

Fry, C.L. and I. Lee, “OHSA Sanctions and the Value of the Firm,” Financial Review (24), 1989; see also Marcus, A.A. and R.S. Goodman, “Victims and Shareholders: The Dilemmas of Presenting Corporate Policy during a Crisis,” The Academy of Management Journal 34, 1991.

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