Safety: The New Competitive Advantage in a World of Liability

Phil La Duke of ERM reports on why more companies are using a prospective supplier’s safety record as criteria for awarding business and why some shops are losing profitable contracts to competitors with better safety records.

As regulators change their view on the relationship of worker safety to contractors and their customers, more companies are using a prospective supplier’s safety record as a criteria for awarding business. some shops have lost profitable contracts to competitors with better safety records. And that’s not all.

 

A growing number of business owners are waking up to the fact that keeping workers safe isn’t just a matter of being a good corporate citizen or an astute executive, it’s becoming a matter of survival.

This isn’t just your typical safety engineer playing chicken little, melodramatically insisting that the sky is falling; far from it. The number of companies that use a prospective supplier’s safety record as a criteria for awarding their business is rising and manufacturers who have long considered worker injuries a “normal” – albeit undesirable and repugnant – cost of doing business are finding themselves losing profitable contracts to competitors with better safety records.

The business world hasn’t suddenly found religion. Companies have practical and pragmatic reasons for their sudden interest in the safety performance of their subcontractors. Government safety regulators are changing the way they view the relationship of contractors and their customers when it comes to worker safety and, much to the chagrin of business owners, governments are tightening the enforcement of grey areas and closing perceived loopholes in the law.

In the U.S., I have seen an increase in OSHA levying fines and issuing citations to companies who turn a blind eye on the infractions of their key suppliers (reference “When Did OSHA Start Doing PR?” (Voices) on p. xx). The dark truth is that there was a time when original equipment manufacturers (OEMs) could outsource the most dangerous jobs to suppliers and forget the liability. This had the practical effect of lowering their Incident Rates and DART Rates so they could gain all of the associated benefits from the lowered rates.

Increasingly, however, OSHA has been stepping up enforcement of a little known exception to the co-employment law that holds that both the employer of record and the customer to a shared responsibility for safety. What this translates to for suppliers and customers is that neither party can no longer shrug their shoulders and plead ignorance when confronted with workers who haven’t received required safety training.

The U.S. is far from alone in tightening it’s requirements and/or enforcement of safety requirements among suppliers. It is worth noting that the Labour Minister in Canada has long held suppliers accountable for safety. Australia recently passed legislation that changed the wording of its safety statutes to move away from the traditional view of “employer” and “employee” and these changes make it easier to hold both the customer and suppler accountable for safety.

The customer’s interest isn’t just driven by self-preservation. Many companies use the potential supplier’s safety record as a key indicator of the efficiency of the supplier and a decisive tell of the robustness of its processes.

In other words, a company with a poor safety performance is likely to be unreliable in other ways as well.

In some countries a serious safety violation can cause operations to grind to a halt. Supply chain managers want to reduce this risk of disruption of operations caused by worker injuries.

Companies are also more cognizant of the impact a high profile supplier injury can have on their public image. When a part fails, it is seldom just the reputation of the part manufacturer that is at risk, but also that of the company that sold the part to the injured party. In fact, most headlines concern the seller, not their supplier. Companies now recognize these risks apply even more so to worker injuries and are more judicious when selecting a supplier with which they partner.

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Phil La Duke

Phil La Duke is a partner in the Performance Assurance Practice at ERM: Environmental Resources Management, 3352 128th Avenue, Holland, MI 49424, 313-244-2525, www.erm.com. You can also follow Phil and reach him on his blogs at www.philladuke.wordpress.com.

2 Comments



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  • Brit Weimer, JD wrote:

    Phil, an excellent overview of many reasons that worker safety is in the employer’s enlightened self-interest. As you state in the conclusion, once the employer is convinced about the benefits of a safety culture, the practical steps are often self-evident and inexpensive: “Once a manufacturer takes safety seriously – from an efficiency, competitive, and sustainability perspective – that shop will find many simple, practical and fast things can be done to protect its workers, its investment, and its livelihood.”

  • Phil La Duke wrote:

    I have found that it is almost universally true that once a company begins to manage safety like a true business issue (instead of a moral one) and manages it like it would any other business element the results are outstandingly positive. For decades I have been selling and implementing a safety systat does this, but it’s truly not for everyone: it takes a lot of hard work, dedication, patience, and trust on the part of the company, but if they are prepared to make the investment, the rewards are truly astounding.